A Strategic Empty Container Logistics Optimization - Essay Example

A Case Report. Introduction. Containerization has many favorable benefits in the transport industry. These positiveeffects have led many companies preferring the use of containers to transport already manufactured goods or semi-processed goods to various parts of the world. However, Yur & Esmer, (2011) says that this intensive usage of containers has consequently led to almost all containers landing in the importing countries leaving the exporting countries with almost no containers to use in transport goods because trade inequalities exist between various regions of the world. Therefore, it has become a critical issue in shipping companies to try device ways of managing the containers and repositioning them to the country of origin. The problem of empty container repositioning has brought loss to the shipping companies (Song & Carter, 2009). In pursuit of figuring out various solutions to the empty container problem, an analysis will be of a case below. Case Summary. Empty container logistics has been a problem affecting Compania Sud Americana de Vapores (CSAV), a shipping company with headquarters in South America and Chile. The management of the company is by use of seven regional offices and serves more than 100 countries globally. CSVA works with 700,000 containers of which the containers stay in the business operation sites waiting acquirement by the shippers. Upon filling the container by the merchant, he/she then takes the containers to the vessels to be transported to various destinations until it reaches the specific consignees of various containers. Transportation of the empty containers to various CSAV depots that are nearest to the point where transactions took place for maintenance purposes. Problem statement. The challenge encountered by CSAV is whereby many containers remain in certain regions, which, their rate of importing is higher than that of exporting hence the containers deportation do not occur. Therefore, they get limited in other regions that export more than they import (Epstein et al., 2012). The other problem is that it is unknown when demand will rise for containers and return date for containers is uncertain. Also, Epstein et al., (2012) says that capacity for ships returning empty containers is not known, and a lot of information needs to be processed hence at times delay decision making that would help decrease stocks of empty containers. Another problem is of ensuring communication of interrelated decisions around all countries that CSAV operates; this was to ensure making decisions at a worldwide level to get rid of empty container challenge. Alternative Solutions to the Empty Container Problem. Different shipping companies have come up with solutions to overcome the problem of empty containers by use of advanced technologies. Among the technologies is the use of foldable containers (Moon, Do Ngoc, & Konings, 2013). Taking containers to nearby ports with equipment necessary to fold the containers follows emptying them. The containers on folding are space-saving hence can be shipped back to where they came from so that they can be used in moving more goods to other various destinations instead of staying where they had been taken waiting when they will be used to ship goods, which may never happen. It is clear that some regions are high importers but export fewer goods hence the containers may never leave that region. Therefore, incurrence of storage costs and lowering efficient in regions the containers are in need by customers. Another solution, although a temporary solution to the problem, is the renting of empty containers between different agencies so that the empty containers can be in use in the region it is located (Song & Carter, 2009). Another short time solution identified by (Dang, Yun, & Kopfer, (2012) is whereby goods are transported using containers in nearby regions because repositioning the empty containers will be fast and less costly. This short term solutions will give time for the establishment of departments in shipping companies that only function will be to do assessments and come up with a plan of action to ensure coordination of operations with the Department of logistics as well as import-export departments (Yur & Esmer, 2011). Other options used to overcome the empty container problem is trans-modal transportation in local agencies (Epstein et al., 2012). The train takes empty containers back to various depots where their demand is high to balance between supply and demand of containers by customers. However, various countries are against the use of trains to transport only empty containers but rather they should be loaded together with the loaded containers. This policy leads to an unreliable repositioning of empty containers since shippers will prefer carrying loaded containers since they are more –profitable. As a result, Moon et al., (2013) says that different shipping companies must devise other options to ensure all depots have sufficient empty containers to serve customers efficiently and effectively. Local agencies sometimes prefer substituting the container a customer requests to different ones that can hold more goods and those that their packing in the vessels will allow use of little space, hence ensuring that less empty containers end up in the importing regions (Dang et al., 2012). For the CSAV case, there is cost reduction since costs of repositioning, leasing the containers, loading them and discharge operations of empty containers will be on the decrease. This is because of implementation of the Empty Container Logistics Optimization (ECO) integrated system. Answers to the Case questions. The optimization model for empty container movement in this system allows CSAV’s depots to have the lowest safe stocks thus the company can meet customers’ demand. In the ECO system, the forecasting model implemented by CSAV helps forecasts the spaces in the vessels to accommodate empty containers when being repositioned and makes a prediction on container demand. Different shipping companies have developed various ways of curbing the problem of empty containers. Some companies has short-term solutions, for example, renting of empty containers between different agencies so that the empty containers can be in use in the regions they are located. Another mechanism, though also short term, is whereby goods are transported using containers in nearby regions because repositioning the empty containers will be fast and less costly. Other options in use by other companies to overcome the empty container problem are Trans-modal transportation in local agencies. Involvement of trains in carrying empty containers back to various depots where their demand is high. However, empty containers are loaded together with the loaded containers. This leads to an unreliable repositioning of empty containers since shippers will prefer carrying loaded containers since they are more profitable (Yur & Esmer, 2011). The short-term solutions used by the other companies tend to concentrate on local regions. Companies that supply customers with goods globally have also devised their solutions. One being the use of foldable containers. Upon emptying the containers, folding follows using certain equipment made for that purpose. More than five containers can occupy a space similar to the space occupied by a container before folding (Moon et al., 2013). This saves on space and cost since deportation of many empty containers to their point of origin is possible. Summary, Conclusion and Lesson Learnt. The ECO system can benefit those companies whose solutions to the problem of the empty container is short term and sometimes unreliable. The ECO will not only help the companies serve the local customers effectively but also will enable the companies to venture into the global market. Upon integration of the ECO system, the companies will be in a position to predict container demand by customers and availability of space in the vessels to take back the empty containers to the point of origin. Therefore, without incurring much cost, they will be able to operate internationally. Another domain where such a system is usable is the manufacturing and sales industry (Dang et al., 2012). In this industry, the forecasting model can use the data obtained in the past sales. After processing the data, usage of information obtained will be to predict the customer demand for the products manufactured to avoid incurring excess costs in manufacturing more goods than required or losses by producing fewer goods than customer demand. An inventory model will ensure avoidance of unnecessary costs since goods transported to the market stores will only be the amount that will meet the customers’ demand. The empty container problem affects most companies involved in shipping since different countries import less than they export and vice versa. Application of the ECO system used by CSAV can help these companies overcome the problem. The ECO system is a combination of models integrated together. Some models will be in charge of data analysis while other models devise a plan of action and implementation criteria. Lesson learnt, in this case, is that other domains can deploy such an integrated system in minimizing unnecessary costs hence maximizing profits. Such areas include sales industry. References Dang, Q. V., Yun, W. Y., & Kopfer, H. (2012). Positioning empty containers under dependent demand process. Computers and Industrial Engineering, 62(3), 708–715. http://doi.org/10.1016/j.cie.2011.11.021 Epstein, R., Neely, A., Weintraub, A., Valenzuela, F., Hurtado, S., Gonzalez, G., … Yung, D. (2012). A strategic empty container logistics optimization in a major shipping company. Interfaces, 42(1), 5–16. http://doi.org/10.1287/inte.1110.0611 Moon, I., Do Ngoc, A.-D., & Konings, R. (2013). Foldable and standard containers in empty container repositioning. Transportation Research Part E: Logistics and Transportation Review, 49(1), 107–124. http://doi.org/10.1016/j.tre.2012.07.005 Song, D.-P., & Carter, J. (2009). Empty container repositioning in liner shipping. Maritime Policy & Management, 36(4), 291–307. http://doi.org/10.1080/03088830903056934 Yur, T., & Esmer, S. (2011). A Review of the Studies on Empty Container Repositioning Problem. European Conference on Shipping & Ports 2011, 22–24. Retrieved from http://www.docin.com/p-296896603.html  Read More