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