exam2 sc
tramps (general traders) ocean carrier
-Do not operate on a fixed schedule (whenever the need comes up) -hired by customers who charter the entire vessel -either single voyage or long term charters -use variety of vessel types: grains(dry), chemicals (liquid) like a rental car company good for large quantity
Factors Shippers Consider in Carrier Choice
-Weight/size of shipment? -Time sensitivity (Is same-day service required?) -How important is cost? -What carriers serve the route? -Is there non-stop service? -How fragile/perishable is the shipment? -Are specialized freight forwarder services required? -Is the shipment hazmat? *need to check services available in your route, what options are best
break- bulk cargo
-also called general or packaged cargo -placed in bags, crates or barrels -loaded individually inside vessel pay attention! -sugar in free form in the vessel: bulk cargo -sugar in packages or bags in the vessel: break bulk cargo -sugar in a container (even in bags): containerized cargo
combination ships (combi)
-can carry both liquid and dry -built combi because original owner was uncertain about future markets
liner shipping contt
-check for services available between the origin and destination -negotiate confidential contracts to avoid published rates be aware of industry trends: -trends impact the service you get -trends impact the rates you will pay
liners ocean carrier
-common carriers -sail on a regular schedule between groups of ports -published schedules and itineraries -vessels serve multiple shippers like a city public bus service
LNG (liquified natural gas)
-compressed to 1/630 of its gaseous volume -usually carry four huge spheres -temperature of -260 degrees F
airfreight forwarders
-do not own flight equipment -act as consolidators -arrange for airfreight deliveries on commercial aircraft -provide door to door service
advantages of containerization
-faster loading and unloading -enabled intermodal transportation -enhanced security -standardization faster and cheaper than moving general cargo
general cargo vessels
-formerly loaded by stevedores -carry pallets of goods (palletization) -this type is losing force due to containerization
airfreight transportation
-important engine for global supply chains -only 1% of the world trade by weight, but approximately 40% of the world trade in value -consistently increased over the years
bulk cargo
-in free form (no packaging) -must be contained by the holds of the vessel -ex: oil, juice, coal, grains -loaded by shovel, buckets, pumps, or conveyor belts
ocean transportation you are going to be responsible for making many important decisions:
-in which form your cargo will move -in which type of vessel -with which carrier
ore and bulk ships
-large compartments for loads -usually entire ship carries one type of cargo -may have load/discharge equipment
airfreight transportation growth factors
-lower barriers to trade -technological advancements -aircraft are more efficient and reliable: larger aircraft offer economies of scale by carrying more cargo and reducing cost of moving freight per ton -lower fuel prices -yields, which are rates per ton mile, have declined in the last 20 years -expansion of ecommerce -enhanced service by companies such as fed ex -greater need for agile supply chains
lesson wrap up if you end up shipping goods in bulk
-monitor not only the price dynamics of the commodity you work with -but also the other commodities that you might compete with for vessels they will influence the availability of vessels to your company, as well as the charter rates
bulk shipping basics
-most bulk cargoes are from raw material trades -two main categories: liquid bulk and dry bulk 1. liquid bulk: major cargo is petroleum 2. dry bulk: 5 major cargoes: iron ore, grains, coal, phosphates and bauxite -mostly with chartered vessels
private/specialized ocean carrier
-owned by merchants or manufacturers themselves to carry their own goods -mostly operated by oil companies -tanker is most common vessel: 18K-500K tons of liquid, can move large volumes of cargo, quick loading and discharge
products suitable for airfreight
-perishable products -high value products -emergency shipments -frequent shipments
disadvantages of containerization
-ports need to have infrastructure -empty containers
containerized cargo
-products are placed into containers -most commonly 20' containers and 40' containers -fills an entire container=container load cargo (CL) -sharing a container=less than container load (LCL)
lesson 7 wrap up: when using air carriers you need to understand
-shipping needs of your products -strategies of your options regarding replenishment -different types of carriers and services available ensure the transportation of your products occurs properly
tankers
-ships with highest worlds registered tonnage -specialized in liquid bulk cargo
more on air transportation
-simplified supply chain -fewer nodes and links -faster and more agile SC
project cargo
-single, certain purpose -often spread over a number of voyages -sometimes require special transportation equipment
neo-bulk cargo
-some characteristics of "bulk": placed in free form -some characteristics of "break-bulk": loaded one by one -ex: steel, logs, automobiles
ships are specialized depending on:
-the products that are carried (liquid bulk, dry bulk, containerized, etc.) -the ports that are served (availability of container cranes) -the shipping lanes (panama canal)
roll on/roll off (ro/ro)
-transportation over water of trucks, trailers, and other vehicles -specialized wheeled equipment permit the easy handling of almost every type of cargo
hedging on charter rates
-tying rate to baltic exchange indexes -baltic exchange collects information on charter rates daily -indexes reflect average charter rates daily: -baltic dry index BDI -23 routes several vessel sizes many commodities
ship charters
-when a ship is chartered the ship is said to be "fixed" -charter agreement is sometimes called a fixture -also referred to as a "charter party" -fixtures are generally negotiated with ship brokers, who bring together ship owners with available capacity and shippers with freight that needs to be shipped
two other players in the air transport industry
1. airfreight forwarders 2. courier services
ocean cargo types
1. containerized cargo 2. bulk cargo 3. break bulk (general cargo) 4. neo bulk cargo 5. project cargo
liners vs tramps
1. different services 2.different cost structures liners: 1.transporting less than shipload parcels requires a more complex overhead 2. obligation to sail to a time table makes a liners capacity inflexible 3. rates are higher than for bulk shipping need to set rates at a sufficient level to remain in business liners: a capital intensive industry: liners must cover cost of -maintenance -depreciation -acquiring new vessels
vessel size/capacity measurement cont
1. exterior dimensions 2. tonnage 3. TEU (20 ft equivilent units)
types of rates:
1. general commodity rates 2. priority reserved rates aka time definite rates 3. express rates 4. container rates 5. contract rates
lesson wrap up if shipping goods with a liner
1. observe the offered services with different liners between the ports of interest for your operation 2. look at the schedules and rates 3. dont forget to get a confidential contract to avoid the official rate proposed by the contortion
types of airfreight carriers
1. passenger-cargo or "combi" carriers 2. all-cargo carriers 3. integrators or express carriers
to earn sufficient revenues, liners employ three pricing strategies (schemes)
1. price discrimination 2. backhaul pricing 3. liner consortiums
three types of ocean carriers
1. private/specialized 2. tramps (general traders) 3. liners
ocean vessel types
1. tankers 2. LNG (liquified natural gas) 3. ore and bulk ships 4. combination ships (combi) 5. general cargo vessels 6. containerships 7. roll on/roll off (ro/ro)
TEU
20 foot equivalent unit one 20ft container =1 TEU FEU=40 ft equivalent units
general commodity rates
Depends on characteristics of the cargo
lesson 8
Intro to Ocean Shipping and Bulk Shipping
lesson 7
Introduction to International Transportation & Air Cargo
ratemaking
airfreight rates depend on weight and volume -denser cargo may be assessed on the basis of weight -lighter cargo may be assessed on the basis of its dimensions or volume
first person to fly debate
alberto santos dumont- brazil/france 1906 wright brothers- US 1903
what types of products move with ocean carriers
all types grains oil ore industrialized goods: textiles, computers, cars
special type of time charter
bareboat charter
Containerization
called the biggest advance in ocean transportation since invention of the steamship
vessel size/ capacity measurement
capacity of cargo limited by -cubic (volume) capacity -weight capacity
1. passenger-cargo or "combi" carriers
carry passengers and freight. freight is generally carried in the belly of the aircraft
3. integrators or express carriers
carry time sensitive "smaller" freight packages providing door to door service ex- UPS or fedex
price discrimination
charging different prices to different customers for the same product ex- coupons lower rates for large volume shippers higher rates for shippers who book last minuite
airfreight movement usually goes hang in hand with ___
countries GDP interesting to note that this world wide growth has primarily been driven by developing nations- to and from asia/ within china
all types of products can be shipped
depending on product and port ex produce vs juice need to know product being shipped and how it will be shipped
containerships
designed for general cargo
Vessel Characteristics
determine both capacity and size 1. exterior dimensions 2. tonnage: -deadweight tonnage (dwt): all weight carried in tons, including the weight for fresh water, fuel, etc -gross tonnage: measure of volume capacity (units of 100 cubit feet of enclosed space) -net tonnage: gross tonnage less spaces that cannot earn revenue
stevedore
dockworker
airfreight documentation
documentation generally travels with the shipment- documents arrive at customs at the same time as the freight a customs house broker will pick freight up at the airport, and use attached documents to clear freight through customs
emergence of megaships
extreme engineering containerships 2006 discovery channel
Malcom Mclean
father of containerization invented container started trucking company in north Carolina sold trucking company and bought vessels shipping vessel "ideal X" in 1956 went from NY, New Jersey to Houston, TX led to major revolution in the transportation industry
in the past: liner conferences
fixed prices operated like a cartel
express rates
for sensitive freight/small packages
container rates
for when an entire container is shipped
when does an air shipment strategy make sense?
high sales price products when transportation costs is a small percentage of final costs perishable products emergency shipments customers who are less sensitive to price aka price inelastic to support an agile supply chain strategy
air transportation: advantages
higher speed lower inventory levels and holding costs supports a more agile supply chain strategy more network flexibility ********EXAMINE TOTAL COSTS
priority reserved rates aka time definite rates
higher than general rates for reserved space on flights
air transportation: disadvantages
higher transportation costs
airfreight container material
lighter materials different shapes may be shaped as inside of the plane
liner shipping pre 1960s
liner companies operated multi deck vessels to handle many different types of cargo even oil tankers were designed to carry general cargo on their backhauls
lesson 9
liner shipping
liner shipping post 1960s
liner ships have become more specialized most ships are build to handle containerized cargo
introduction to liner shipping
liners carry about 60% of the value of goods shipped by sea liners provide transportation that is: -relatively fast -reliable -frequent -for (mainly) manufactured or semi processed goods
bulk vs liner shipping
liners: -mainly transport "general cargo" -containerized or break-bulk (eg. palletized) goods -over regular routes tramps (AKA bulk carriers): -transport liquid and/or dry bulk goods -often in full shiploads -bulk ships mainly operate on "tramp" or irregular routings according to supply and demand
plimsoll marks
load lines that indicate if vessel is full
ocean transportation: disadvantages
lower speed higher inventory levels and holding costs
ocean transportation: advantages
lower transportation costs
lesson wrap up:
many new terms needed to: -select carrier -select cargo type -select vessel type to best meet your companys operational strategies
backhaul pricing
many routes are "unbalanced" in terms of cargo flows liners will generally offer lower rates for backhaul shipments
slow steaming
operating containerships at significantly less than their maximum the triple E- class liners: 1. save on cost 2. lower carbon emissions 3. claim services are more reliable -if delay is detected they can speed up -shippers would need to hold lower safety stocks shippers: 1. longer lead times -higher inventory levels -higher inventory costs 2. do not feel that reliability compensates for the additional inventory costs 3. feel rates have not gone down from slow steam saving a new reality in liner shipping
liners follow predetermined itineraries called
port rotations
trend 1: vessels are becoming bigger
pure economies of scale the more containers a vessel can carry= the smaller the cost per container this is leading to megacontainer ships
international operations: key decision
selection of the transportation mode for international shipments
fixture or charter party
sets out the terms on which the ship is to be chartered info that may be included: 1. details of this ship and the contracting parties including: -the name of the ship owner -details of the ship (name, capacity, etc) -the ships position -brokerage fees including who pays them 2. a description of the cargo to be carried 3. the terms on which the cargo is to be carried including: -dates on which the vessel will be available for loading -the loading and discharging ports -time allowed for loading and unloading -demurrage rates (penalties for delay) 4. terms of payment 5. penalties for non performance
liner consortiums
sharing information with carriers that serve similar markets objective: protect industry form destructive competition meet and exchange market info jointly conduct market research discuss ways that members can use to manage costs discuss ways to improve efficiency develop guidelines for rates and charges two main types: 1. transpacific stabilization agreement (TSA)- between Asia and US 2. TSA westbound- between US to Asia
determining charter rates
ship owners and shippers negotiate to establish a rate which reflects the balance of supply and demand the charter market can be very volatile
liner conferences controversy: shippers vs liners
shippers: complain that liners are getting together and establishing higher prices liners: argue that they need to establish prices to protect their industry what happens in the US? -liner conferences can exsist -US allows shippers to sign confidential contracts (lower rates)
short term charter contract vs a long term contract
short term 1 yr: -have the flexibility when it comes to paying a fair market rate -need to shop for vessels every year long term 10 yr: -have the vessel guaranteed for 10 years -might pay a higher price if charter rates go down
trend 2: sailing slower
slow steaming: operating containerships at significantly less than their maximum speed slow speeding is conducted at 18 knots, which is 21 miles per hour
contract rates
subject to negotiation between shipper and carrier
challenges brought by mega container ships
the bigger the vessel the deeper the drafts distance under water increased dredging costs by the ports the cranes used for loading and unloading need longer arms and port infrastructure need to expand container storage areas and updated transportation connectivity infrastructure not easy due to many ports being in heart of urban areas
bareboat charter
the charterer assumes both the general operating expenses and the voyage expenses for the ship
time charters
the ship owner agrees to charter the ship for a period of time 2. time charters -charter for a specific length of time -operating expenses are split between "ship owner" and "charterer" (ie shipper) -ship owner pays: general operating costs of the vessel (eg: crew, mainentence, repairs) -shipper (ie charterer) pays: costs specific to the voyages while the ship is chartered (eg: bunker fuel, port and canal charges)
voyage charters
the ship owner agrees to charter the ship for a specific voyage (from A to B) -provides transport for a specific cargo from port A to port B for a fixed price per ton -the ship owner pays all operating costs for the voyage, as set out in the charter agreement -note that both shipper and vessel owner have responsibilities shipper: -makes transportation arrangements with railroads at the point of origin and destination for specific dates -ensures that the loading and unloading of its cargo at ports are conducted according to schedule vessel owner: -responsible for: 1. bringing the vessel at the right port at the right date for loading 2. arriving at the port of destination by the agreed date -has many other customers waiting after service is finished
vessel charter types
the two most important are: 1. voyage charters 2. time charters
types of ocean vessels-why?
there are specialized ships for all types of trade
a shipper sometimes will want to charter a ship for a certain length of time, one month, one year, five years, 10 years, etc
they will then sign a time charter
2. all-cargo carriers
use freighters. airplane is configured to carry only freight
courier services
will hand carry freight to international destinations
if benefits of airfreight outweigh increased transportation costs,
you will have 3 options of airfreight carriers