ocean and air: cargo handling and containerization international logistics
TRANSCRIPT
Ocean and Air: Cargo Handling Ocean and Air: Cargo Handling and Containerizationand Containerization
International Logistics
Learning ObjectivesLearning Objectives
Compare Domestic with International Logistics
Provide accessible overview of Ocean and Air Cargo Handling and Containerization
“Virtual” Picture Tour of Port Operations and Containerization
Domestic Vs. International LogisticsDomestic Vs. International Logistics
Seller
TransportationCarrier
Buyer
US Bank
US GovernmentAgencies
Foreign GovernmentAgencies
Foreign Bank
US Seller
Domestic Inland Carrier
US Port of Exit
Ocean/Air Carrier
Foreign Port of Entry
Foreign Inland Carrier
Buyer
Movement of GoodsInformation Flows
Export Facilitators
Domestic Vs. International LogisticsDomestic Vs. International Logistics
Cost
Transport mode
Inventories
Agents
Financial risk
Cargo risk
About 10% of U.S. GDP today
Mainly truck and rail
Lower levels, reflecting short-order, lead-time requirements and improved transport capabilities
Modest usage, mostly in rail
Low
Low
Estimated at 16% of world GDP today
Mainly ocean and air, with significant intermodal activity
Higher levels, reflecting longer lead times and greater demand and transit uncertainty
Heavy reliance on forwarders, consolidators, and customs brokers
High, due to differences in currencies, inflation levels and little recourse for default
High, due to longer/more difficult transit, frequent cargo handling, and varying levels of infrastructure development
Domestic International
Domestic Vs. International Logistics IIDomestic Vs. International Logistics II
Government agencies
Administration
Communication
Cultural differences
Primarily for hazardous materials, weight, safety laws, and some tariff requirements
Minimal documentation involved (e.g., purchase order, bill of lading, invoice)
Voice, paper-based systems adequate, with growing usage of electronic data interchange and Internet
Relative homogeneity requires little product modification
Many agencies involved (e.g., customs, commerce, agriculture, transportation
Significant paperwork; the U.S.
Voice and paper costly and often ineffective; movement toward electronic interchange but variations in standards hinder widespread usage
Cultural differences require significant market and product adaptation
Domestic International
Complex Distances & Transportation Modes
– Ocean & Air transport more common than for domestic flows
– Shipping: 1998: 30% of U.S. exports by value, down from 40% in 1988
– Airfreight
– Governments often regulate which carriers can be used, especially for sales to the government
– Must factor-in total carrying costs including delays, port storage time, warehouse inventory and exchange rate changes
– Global Operations and Product Customization (at order /shipping point or in local environment) Complicated Logistical Systems
Features of International LogisticsFeatures of International Logistics
Brainstorming SessionBrainstorming Session
(Obvious) Differences exist between ocean and air cargo transportation. – Define the factors that characterize these differences– Identify these differences
Air Freight/CargoAir Freight/Cargo
Significant Part of Aviation Industry: Est. Revenues of $49.5bn in 2005
< 1% Domestic (By weight)
~ 2% International (By weight)
> 30% International (By value): Total value of goods = US$3.25 trillion (35.6% est).
International air freight volume growth slowed significantly in 2005, falling from 13.4% in 2004 to 3.2% in 2005
Air freight share reduced slightly in previous years: Recent strong increases in prices of commodity goods (e.g. oil) transported by surface modes
Region-specific signs of recovery: Major Asian; North American; and Large European markets
Advantages of Air Transportation for Advantages of Air Transportation for International LogisticsInternational Logistics
Speed
Wider Market Areas
Advantageous over Surface Transportation Systems (congestion, poorly developed infrastructure, etc.)
Air-appropriate goods: Define Characteristics?
Air Transportation - Conducive Business Air Transportation - Conducive Business CharacteristicsCharacteristics
High-Value, Low-Bulk Cargo
“JIT” Inventory Management Practices
Lean Production Methods
Short(er) Order Cycle times
Globalization: Impact on Sourcing, Production and Logistics Practices
Outsourcing – International Contract Manufacturing Alliances
Commercial Development of Emerging Economies
Ocean Shipping Cargo HandlingOcean Shipping Cargo Handling
Transfer of Cargo in and out of Ship’s Holds
Handling Cargo on Dock
Transfer of Cargo to Ground Transportation and Stowage
Determines vessel’s turnaround time in Port earning power
Historically Manual (Longshoremen OR Stevedores)
Today Mechanical – Optimized Cargo Stowage Programs
Cargo Handling EquipmentCargo Handling Equipment
Yard trucks (hostlers) Cranes Top and side handlers Forklifts Loaders, etc
Cargo Handling MethodsCargo Handling Methods
Crane/Conveyor Combi (Dry Bulk Cargo) Pipeline (Liquid Bulk cargo) Breakbulk Cargo
– Palletized
– LO/LO (Crane lifted)
– RO/RO (Automobiles and equipment - Driven Cargo) Containers (>54% of all cargo)
ContainerizationContainerization
Unitization/Consolidation of multiple units
System of intermodal freight/cargo transport
Standard containers can be loaded and sealed intact onto ships, railcars, planes and trucks
Improves efficiency, protects materiel, reduces handling & pilferage
Varying Sizes (ft) (Ocean):8x8x40; 8x8x20; 8x8x10; 8.5x9.5x40
Standard Conversion Units/Sizes: 20 ft (TEU) or 40 ft (FEU)
Shorter to permit multiple units on railcars
Containerization - HistoryContainerization - History
History - 26th April 1956: The ideal–X. Trucking entrepreneur Malcom McLean put 58
containers aboard a refitted tanker ship, the “Ideal-X”" and sailed them from Newark to Houston
Had watched teams of dock workers unloading goods from trucks and transferring them to ships and came up with a more efficient way
Refitted two oil tankers and designed truck containers that could be stacked on or below their decks
Significant growth during Vietnam War
Containerization - TodayContainerization - Today
No. of containers worldwide: 22 million
Number of container ships worldwide: 7,936
Container traffic: >116 million TEUs
Value of Container Shipping:>$6.5 trillion
Worldwide container traffic grows by average of ~ 13% since 2003
Infrastructure beginning to ‘creak’ under the strain
Company TEU capacity
Market Share
Number of ships
A.P. Moller-Maersk Group 1,665,272 18.2% 549
Mediterranean Shipping Co. S.A. 865,890 8.6% 299
CMA CGM 507,954 5.6% 256
Evergreen Marine Corporation 477,911 5.2% 153
Hapag-Lloyd 412,344 4.5% 140
China Shipping Container Lines 346,493 3.8% 111
American President Lines 331,437 3.6% 99
Hanjin-Senator 328,794 3.6% 145
COSCO 322,326 3.5% 118
NYK Line 302,213 3.3% 105
Top 10 container shipping companies in order of TEU capacity, 2006
““Virtual Picture” TourVirtual Picture” Tour
No substitute for the real thing – JAXPORT Tour!
Container Ship In IstanbulContainer Ship In Istanbul
Double-stack ContainerizationDouble-stack Containerization
Double-stack ContainerizationDouble-stack Containerization
Most flatcars cannot carry more than one standard 40 foot container
BUT, a well car can accept a container and still leave enough clearance for another container on top, on most North American rail routes that do not have overhead electric power
American President Lines introduced this "double stack" principle under the name of "Stacktrain" rail service in 1984
It saved shippers money and now accounts for almost 70 percent of intermodal freight transport shipments in the US
A container ship being loaded by a Portainer A container ship being loaded by a Portainer (Container Crane) in Copenhagen Harbour(Container Crane) in Copenhagen Harbour
Twistlocks: Capture and constrain containers. Twistlocks: Capture and constrain containers.
Forklifts designed to handle containers have similar Forklifts designed to handle containers have similar
devices.devices.
Shipping Containers at the terminal at Shipping Containers at the terminal at Port Elizabeth, New Jersey Port Elizabeth, New Jersey
Pier T Container Terminal in Long Beach, Ca.Pier T Container Terminal in Long Beach, Ca.
Intermodal rail in the foreground and gantry cranes behindIntermodal rail in the foreground and gantry cranes behind
Container stacks at Keppel Container Container stacks at Keppel Container Terminal in Singapore Terminal in Singapore
Container ship "Rita" being loaded at Container ship "Rita" being loaded at Copenhagen by a PortainerCopenhagen by a Portainer
Self taken picture of a Roll-On Roll-Off (RO-RO) ship with Self taken picture of a Roll-On Roll-Off (RO-RO) ship with ship's name removed to avoid any conflicts ship's name removed to avoid any conflicts
Figure 15-1:Figure 15-1:Loading a Travel Trailer Aboard a RO/RO Vessel in the Port of SeattleLoading a Travel Trailer Aboard a RO/RO Vessel in the Port of Seattle
Examples of Different ContainersExamples of Different Containers
8 X 8.5X20 ft
45 ftHigh cube
Flatrack
RefrigeratedOpen top
Container Population and CostsContainer Population and Costs
Grew from 3.5M TEU in 1983 to approx 10.5M TEU population in 1997– Growth rate of 7% compounded annually– 60% of growth due to expansion– 40% for replacement
Ocean carriers spend $1.8B/yr on new containers
20% of containers moved on ships are empty—costing ocean carriers an estimated $3B/yr in handling fees
Air Air ContainersContainers
Unit Load Devices (ULDs)Unit Load Devices (ULDs) Pallets and containers used to load luggage, freight, and mail on wide-body aircraft and
specific narrow-body aircraft
Benefits: – Fewer units to load
– Saves ground crews time and effort
– Helps prevent delayed flights
– Contents can be tracked since each ULD is manifested separately
Come in 2 Forms:– Pallets: Rugged sheets of aluminum with rims designed to lock onto cargo net lugs
– Containers:
• Also known as Cans and Pods
• Fully enclosed containers made of aluminum or combination of aluminum (frame) and plastic (walls)
• May have refrigeration units built-in depending on nature of goods inside
Aircraft loadings can be made up of all containers, all pallets, or a mix of ULD types, depending on convenience
ULD Type - Airfreight ContainerULD Type - Airfreight Container
Cargo Loading - AirCargo Loading - Air
Cargo StorageCargo Storage
Ocean Ports - ExerciseOcean Ports - Exercise
Consider the table “World Port Rankings -2002” which follows the assigned reading Chapter 13 by Thomchik.
Explain the difference between the table components “Total Cargo Volume, Metric Tons (000s)” and “Container Traffic (TEUs, 000).
Next, consider “Table 25 (Top 20 Foreign Trade Freight Gateways by Value of Shipments: 2002)” which focuses on USA gateways. Print out a USA map and plot the location of the 20 gateways on the map.
What observations can you make from the plotted map with respect to the type and mix of the modal gateways, geographic locations, economic development and impact, etc.?
Comparison of Transportation ModesComparison of Transportation Modes(US Domestic)(US Domestic)
Motor Rail Air Water Pipeline
Cost
Moderate
Low
High
Low
Low
Market coverage
Point-to-point
Terminal-to-terminal
Terminal-to-terminal
Terminal-to-terminal
Terminal-to-terminal
Number of competitors
Many Moderate Moderate Few Few
Predominant traffic
All types Low-moderate value, moderate-high- density
High value, low moderate density
Low value, high density
Low value, high density
Average length of haul
Short to long Medium to long
Medium to long
Medium to long
Medium to long
Equipment capacity (tons)
10-25 50-12,000 5-125 1,000-60,000 30,000-2,500,000
Economic CharacteristicsEconomic Characteristics
Motor Rail Air Water Pipeline
Speed
Moderate
Slow
Fast
Slow
Slow
Availability High Moderate Moderate Low Low
Consistency (delivery time variability)
High Moderate High Low-moderate
High
Loss and damage Low Moderate-high
Low Low-moderate
Low
Flexibility (adjustment to shipper’s needs)
High Moderate Low-moderate
Low Low
Comparison of Transportation ModesComparison of Transportation Modes(US Domestic)(US Domestic)
Service CharacteristicsService Characteristics
Cost Factors Often Considered inCost Factors Often Considered inMode/Carrier SelectionMode/Carrier Selection
Freight costs
Inventory carrying costs – inventory in pipeline
– cycle stock at the receiving location
– required safety stock at the receiving location
Investment cost required to produce the inventory to fill the pipeline
Service Factors Often Considered in Service Factors Often Considered in Mode/ Carrier SelectionMode/ Carrier Selection
Perceived quality of customer service
Shipment tracking and tracing capabilities
Billing/invoicing accuracy
Electronic data interchange (EDI) capabilities
Potential to develop mutually beneficial long-term partnership
Cargo capacity limitations
Ability to provide service that does not damage goods in transit
Customs clearance capabilities for international shipments
Impact on the shipper’s negotiating position/leverage on other shipping activities
Cost Structures IICost Structures II
Cost-of-Service Pricing Establishes rates at
levels that cover carriers’ fixed and variable costs + profit margin
Establishes lower limit of transportation rates (the price ‘floor’)
Value-of-Service Pricing Maximizes Carriers’
revenues
Market/Competition-driven
Establishes upper limit of transportation rates (the price ‘ceiling’)
Total Logistics Cost Analysis – Ocean vs. AirTotal Logistics Cost Analysis – Ocean vs. Air
Factors to consider (Table 11-3) The Higher the Value : Weight ratio, the more likely
justification for Air Cargo