improving the logistics of moving empty containers vs

7/27/2019 Improving the Logistics of Moving Empty Containers Vs

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11th April 2008

IMPROVING THE LOGISTICS OF MOVING

EMPTY CONTAINERS

STRICTLY PRIVATE & CONFIDENTIAL

Not to be distributed to any third party without approval from the author


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10 March 2008

Index

Container Volume & Trade Forecast Estimated and Forecast Growth Rates for Container Trade and Geographical

Distribution of Container Volumes World Container Forecast to 2024 Transport of Empty Containers Volume of Empty Containers Shipped vis--vis the Fulls Empty Container Volumes and Imbalances on the East/West Trades Estimated development of Empty Containers Issues Related to Empty Containers Patterns of Empty Container Movement & Causes of Empty Container Accumulation The Imbalance Problem Observations

Empty Container Repositioning & the Container Transport Costs Strategies to Reduce the Costs of Empty Transport Past Attempts Reasons for Failure Necessary Features for a Successful Folding Container Our Design Solution Benefits of Our Design Solution References


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YearContainer Volumes

(m TEUs)CAGR over

Previous Period

1980 13.5 -

1990 28.7 7.8%

2000 68.7 9.1%

2010 138.9 7.3%

2015 177.6 5.0%

Estimated and Forecast Growth Ratesfor Container Trade

Geographical Distribution of Container Volumes (%)

2002

2015

Source: United Nations White Paper: Regional Shipping and Port Development Strategies (Container Traffic Forecasts) Study Estimates

Europe, 21.8East Asia, 24.1

South-East Asia, 10.1

North Asia, 10.0

ANZ/Pacific, 2.7

Africa, 2.9

North America, 16.6

Latin America, 5.4

South Asia, 3.9 Middle East, 2.5

Europe, 17.5

East Asia, 32.0

South-East Asia, 10.3

North Asia, 8.4ANZ/Pacific, 2.3

Africa, 3.0

North America, 13.3

Latin America, 5.6

South Asia, 5.3 Middle East, 2.4


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Past and Forecast Global Container Volumes (1980-2015) Container Trade By Trade Group (2002 & 2015)

The CAGR for global container trade volumes from 2002to 2015 is estimated to be 6.6%, compared to 8.5% p.a.during 1980-2002 shipment to grow to 177.6 m TEU by2015, up from 77.8 m TEU in 2002.

The average growth rate through 2002 to 2010 has beenestimated at 7.5% p.a., while for the following five years,the growth rate is expected to decline to 5%.

For every 1% increase or decrease in estimated globaleconomic growth, the rate of growth in container volumeschanges by approximately 1.5%.

Container trade volumes on the East-West routes willincrease from 34 m TEU in 2002 to 70 m TEU in 2015representing a CAGR of 5.8% p.a.

The intraregional trades will show solid growth from 28 mTEU to 72 m TEU with a CAGR of 7.5% p.a.

The North-South trade is also expected to grow at a CAGRof 6.2% p.a., exceeding the growth rate of the East-Westtrade.

Source: United Nations White Paper: Regional Shipping and Port Development Strategies (Container Traffic Forecasts) Study Estimates


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World Container Forecast to 2024 in TEUs : (186% Increase in Next 20 Years)

Source: Global Insight, 2004 CAGR Compound Annual Growth Rate


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It can be seen that until approximately 1996 there was a clear declining trend in the ratio of empty to full containers, asincreasingly sophisticated container logistics gradually reduced the number of empty container movements.

In 1998, the ratio increased to well over 20%.

This was due to the emergence of very pronounced imbalance in the two main Asian trades with Europe and NorthAmerica caused by the Asian currency crisis. This imbalance has persisted though to see present day and repositioning of empty containers has remained a major

concern for carriers. The declining trend that was evident prior to 1998 is unlikely to re-emerge with the proportion of empty containers

increasing to nearly 23% in 2015. Carriers will do well to achieve levels which are lower.

Transport of Empty Containers

Empty Share of Container Movements (1990-2006, 2015)

Source: Drewry Shipping Consultants, Study estimates


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The graph above shows the ratio of empty containers to total container port throughput for the period 1980-2015. In 2000, the ratio increased to well over 20%. With no sign of any reversal of the imbalance trends in the Asian east/west trades, the global incidence is unlikely to

revert to the sub-19% level which was common-place in the mid 1990s. This is irrespective of any further improvements which may be developed in equipment management systems, or what

additional equipment pooling arrangements are instituted. Carriers will do well to hold the empty incidence at current levels of just under 21%.

Empties vs. Fulls

Source: Drewry Shipping Consultants, Institute of Shipping Economics & Logistics (ISL) and Global Insight projections

Volume of Empties as against Total Containers Shipped

118.7

186.1

318.4

492

656

44.170.2

30.4

0

100

200

300

400

500

600

700

1980 1985 1990 1995 2000 2005 2010 2015

MillionTEUs

Empties Total

20.2%23.3%21.7%

22.7%

18.4%21.2%

20.5%19.2%


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Empty Container Volumes and Imbalances on the East / West Trades

Source: Drewry Annual Container Market Review and Forecast 2006-07


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Estimated Development of Empty ContainersVolumes and Incidence by Region (1980-2005)

Source: Drewry Annual Container Market Review and Forecast 2006-07


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Container movement is governed by a different set of factors at each level and comprises of different set of stakeholders. To better understand the flow of containers at each level, three different case scenarios should be examined: container

movement on a global, regional and local level.

At a global level, containers move between surplus and deficit regions with main actor the shipping line.

With reference to a Major Coastal Economic Activity Center, if the inflow of containers is greater than outflow (importcenter) then the area shows a surplus of empty containers.

When outflow is greater than inflow there is demand for empty containers in the area. In each case, ocean carriers are facedwith a set of options on how to move containers.

Depending on these carrier choices as well as level activity and operations, the empty container movement andaccumulation conditions are defined on a regional and local level.

Patterns of Empty Container Movement

Container movement is governed by a different set of factors at each level and comprises of different set of stakeholders.

The major cause of the empty container accumulation problem is the fundamental global imbalance of trade between theEast and the West and the associated trade imbalance in the US.

Other causes of empty container accumulation are associated with:

tariff imbalances and the related cost of repositioning empty containers from surplus to deficit areas,

The cost of inland transportation, marginal and volatile profitability of the leasing industry, The cost of manufacturing and purchasing new boxes in relation to the cost of leasing containers,

The terms of leasing contracts between leasing companies and ocean carriers and

The cost of inspection and maintenance for aged containers.

Causes of Empty Container Accumulation


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Patterns of Empty Container MovementsThe Holistic Network

Source: Adapted from Boile, M., Theofanis S., Golias M. and Mittal N. (2006) Empty Marine Container Management:Addressing Locally a Global Problem. TRB Annual Meeting, Washington, DC. Paper # 06-2147


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At least one in four containers currently moving through major U.S. container ports is an empty container beingrepositioned, with no cargo revenue offsetting the cost of the move

In 2005, 6 m of the 20.6 m containers passing through five key U.S. container ports were empty

About 2.5 m TEUs of empty containers are stored in yards and depots around the world, underlining the issue of themovement and accumulation of empty containers

A US$320 b annual U.S. trade deficit with Asia; more than US$200 b with China alone, has resulted in a near 3:1 cargoand equipment imbalance favoring imports in the Pacific market

According to International Asset Systems Research, the average container is idle or undergoingempty repositioning for over 50% of its life-span (see figure below on container usage)

The Imbalance Problem - Observations

Source: Container Usage Asset Management in the Global Container Logistics Chain by Paul Crinks, President & CEO, International Asset Systems


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In 2003, empty containers accounted for 20% of the ocean container movements, at a cost of US$11 b as compared to acost of US$3.5 b a year in early 1990s (Drewry Shipping Consultants)

US$110 b per year spent to manage shipments globally, 15% (US$16.8 b) associated with inefficiencies in containeroperations (including empty containers idle time)

To reimburse the costs of empty container returns, shipping companies impose heavy surcharges on loaded containersexported from industrialized countries with the agreement of shipping conferences that represent operators in variouslocations in the world

These surcharges can vary from US$100 to US$1000 per TEU and form a noticeable proportion of freight rates on searoutes from the industrialized nations to many countries in Asia, Africa and the Caribbean resulting in increased cost ofgoods imported by developing countries

Costs associated with repositioning include an allowance for terminal handling, the costs of rest wage, administration,container storage, ships time, equipment per diems and repair (US$14.9 b in 2004)

Additional costs include overland repositioning, inland imbalance costs estimated at another US$7.7 b, for a total emptycontainer cost direct and indirect of an estimated US$22.6 b (Drewry, 2003)

Empty Container Repositioning the Cost Aspect

The costs of moving a container fall into five major categories:

The ship which includes operating expenses, capital costs and bunkers 23%

The containers including maintenance 18%

Ports and terminals 21%

Inland transport 25%

Other costs, including container repositioning 13%

Container Transport Costs


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To help to reduce the transportation and terminal handling costof empty containers and to solve the space shortage problem,the concept of a Collapsible Container with the followingcharacteristics has been innovated: Conserve 75% space

Reduce transportation cost accordingly

Comply with ISO standard

Can be folded and unfolded in just three minutes

Manufacturing cost not greater than that of standardcontainers

Smart design, such as smart locking mechanism,

water tightness, low tare weight, etc.

Strategies to Reduce the Costs of Empty Transport

Source: Imbalances and Container Repositioning Strategies byTheofanis, Rodrigue and Boile (2007)


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Source: Fallpac AB, The Folding Process of the Fallpac Container

(1)

(2)

(3)

(4)

Past Attempts

The Folding Process of the Fallpac Container


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Past Attempts

The Folding Process of the Six-in-One Container

Source: See Six-In-One Containers Company S.A., Figure 1. The Folding Process of the Six-in-One Container


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Holland Container Innovation

Past Attempts


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Reasons For Failure

Folding was manual Parts were separated Time required for dismantling an assembling was significant Structurally not as strong

Insufficient protection because of insufficient seals

High wear and tear of hinge resulting in high costs for repair and maintenance

Loss of component parts during the hectic transportation business

Complicated assembling in connection with insufficient handling by poorly educated workers

Higher initial costs for collapsible containers against standard containers

Long delays in collapsing and reassembling containers

Although the concept of collapsible containers has been around for some time, they have notbeen successful for the following reasons:


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Necessary Features for a Successful Folding Container

Low Cost for folding and unfolding containers

Low manufacturing costs ( purchase price)

Compatibility with existing equipment for intermodal transport

The external dimensions and gross weight

The strength & stiffness

Water tightness Corner fittings at the bottom and top of the container

Ability to merge folded containers to a bundle with external standard dimensions

Ability to lift a bundle of folded containers on top

Simple & effective consolidation of a bundle of folder containers

Specific Technical Features

Robustness for damages

Avoiding loose parts

Use of high-quality joint-hinge constructions

Simple and safe bundling of a package of empties

Simple folding and unfolding

Source : Professors Rob Konning & Remmelt Thijs


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Our Design(Patent applications filed )

Folding Base

Folding Size

(Unfolded Container)

(Folded Container)

Diagram 1

Diagram 2

(First Step of Folding)

Diagram 3

(Second Step of Folding)

Diagram 4


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Our Design Solution

Our folding container has been designed by two professors from one of the best engineering colleges in India

Our design features will meet all the above requirements as stated and is expected to conform with ISO standards forocean going containers

It will automatically fold to one quarter its size within three to four minutes

It will require between one to two unskilled labor

There will be no separate parts which might get lost

It is expected to cost 10-15% more than a standard container

The additional weight will be between 10-15 %

The cost of the folding mechanism is estimated to be approximately the cost of two to three containers

Four containers stacked vertically will have a self locking mechanism

When stacked the pillars will have the necessary holes for lifting and lashing on board

Additional containers can be stacked on the folded container and will carry the same weight load as a normalcontainer

We have filed the patents applications

We would be happy to show you a video demonstration

We have shown the proof of concept to a number of shipping lines and have received very encouraging feedback


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Benefits of Our Design Solution

Benefits to the Shipper

At the point of unloading, the container is folded to one quarter of its size.

This enables them to use fewer trailers to ship the empties back i.e. four containers in the space of one

Significant cost savings

Less traffic at his unloading dock

Faster loading of empties

Less space occupied by empties

Benefits to the Port Operator

Faster turnaround of ships after unloading i.e. one ship can carry the same amount of empties instead of four

No new handling equipment required.

Fewer trailers visiting the yard to unload empties. Less traffic, less pollution In the same space stack as many as three time more empty containers

Security

The folding container ensures better security since the empty container cannot be used to smuggle anyprohibited item out of the country

Benefits to the Environment With fewer trailers and trucks on the road particularly near the ports, less pollution

Lesser traffic on the roads near the ports


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References United Nations White Paper: Regional Shipping and Port Development Strategies Empty Intermodal Container Management by Maria Boil, Ph.D., 2005 NJDOT Research Showcase, October 2005 Empty Marine Container Management: Addressing Locally a Global Problem. TRB Annual Meeting, Washington,

DC. Paper # 06-2147 Container Usage Asset Management in the Global Container Logistics Chain by Paul Crinks, President & CEO,

International Asset Systems

Conventional Empty Repositioning, IAS InterChange, International Asset Systems Conventional Empty Repositioning, IAS InterBox, International Asset Systems Container Repositioning, Boston Consulting Group, 2007 Is the Drive for Ever Bigger Containerships Irresistible?, Lloyds List Shipping Forecasting Conference by M.

Stopford Cost of Operations and Time for Shipping a 40 Container; in APECs Congestion Points Study, Phase III, Best

Practices Manual and Technical Report, Volume 2, Sea Transport, Feb 1997 Imbalances and Container Repositioning Strategies by Theofanis, Rodrigue and Boile (2007)

White Paper By Drewry Shipping Consultants Shipping Container Housing Guide: Inefficiencies and Risks The Geography of Transport Systems, Chapter 4 Transportation Terminals, Concepts Empty Intermodal Container Management, Final Report, July 2006, by Dr. Maria P. Boile http://www.worldcargonews.com/htm/nf20041130.535525.htm, November 2004, Tackling the Empty Container

Problem http://www.metrans.org/research/final/01-05_Final.pdf Pg.35 http://www.ejtir.tudelft.nl/issues/2001_04/pdf/2001_04_01.pdf

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