Importance of Logistic Services by Liner Shipping Companies - Essay Example

MARITIME ECONOMICS MARITIME ECONOMICS Inserts His/her Inserts Grade Inserts Table of ContentAbstract 3 This report covers the maritime economics in the context of logistic and integration study which occur in shipping, port and terminal management. The concept focuses on joint optimization of container terminals and ocean transport networks. This research was carried to investigate capabilities of firms operating in the logistics industry. The key strategic elements for building competitive capabilities on liner image, profitability, marketing, and management addressed in this report. 3 Issues related to logistics services are covered in this report which is to provide rapid customer response, location of services are convenient for access, and utilize up to date information technology to improving service operations (Osler 2012). The paper also intends to analyze longevity of technology based on competitive advantage and their importance and view of how to improve the competitiveness. 3 Introduction 4 Maritime economics involves the integration of ocean transport and terminal management. The main goal is to provide an in-depth analysis of logistics services. A keen interest is on the way the logistics and maritime time related to economics which brings about the ocean transport business. It revolves around the focusing on the joint optimization of container terminals and liner shipping networks (Blecker & Kersten 2011). 4 Logistics in many contexts involves the delivery f goods and services with proper quality and quantity. Logistics depends on timely delivery and the destination of delivery. The most notable aspect of logistic is promptness of delivery because delay of any kind causes significant losses to the recipient of the consignment. Logistics traditionally depended on transportation only. Nowadays, it depends on reliable roads, and record keeping improved by higher technology, globalization, legislation, and integration. The logistics management comprises of material management, channel management, physical distribution, and it is pert of the whole supply chain management. Movement of goods is not the only logistics activities; it involves stock control in the warehousing systems and the movement of goods in the storage units (Martin 2009). Logistics forms a crucial area in supply chain and brings issues like planning, implementation, and effective management. 4 Competition in Liner Markets 4 Many immerse growth activities realized in the logistics sector especially in the emerging economies. This shows a better future with third party providers. This growth realized in the area of logistics largely coming from third party providers such as transporters, warehouse owners and freight forwarders like clearing and forwarding companies. The nature of liner shipping operation involves liner companies to provide fixed schedules. This creates trade groups forming cartel power in their supply volumes emanating to be oligopoly. This competition has led to capital intensive nature of the providers which forces the industry to adopt the structure of oligopoly. Liner shipping is characterized by few providers and inter-firm rivalry. The industry prevents new comers to enter into the market due to large capital investment. They control the industry as cartels forming small third party service providers in the same industries. Third party provides in the liner shipping industry are subsidiaries of the liner shipping providers. The little difference in service makes industry venerable to stiff completions by coping one industry ideas (Martin 2009). The oligopoly nature of liner shipping accounting for fewer carriers controlling majority of supply affects the customer base having same trends in the markets. Completion in terms of winning customer loyalty affects the industry. 5 With the introduction of new technologies, the providers face each other in the advancement of the innovation employed. Advance systems integration; simplify large, complex operations for delivery purposes leads to bigger companies take a larger share in the market. Much liner shipping depends largely on cost saving through the price mechanism (Tompkins & Harmelink 2004). Affecting the entire industry profit making by most cost cutting and lowering of price to the customers. The market involves transaction on two ports this leads to more macroeconomic view. The players understand how the market structure and players’ conduct will affect the market performance. According to some research analysis made from microeconomic view that market structure can be polarized from perfect competitions to the monopoly market structure. The monopoly nature will affect the liner shipping industry market with product homogeneity, meaning the product supplies by different firms will be the same (Martin 2009). Information freely available, meaning prices known by all parties involved. Firms and consumers take the prices as given. 6 Importance of Logistic Services by Liner Shipping Companies 6 Logistics is one of essential functions of business today without logistics no goods can reach their destination and no marketing; production can succeed without logistics support. The mobility factor of movement of production to consumption point increases with the logistics services. When customer needs are to be met what solves that the problem is the logistic service (Tompkins & Harmelink 2004). 6 Logistics service becomes an extremely significant aspect to wining customers for the loyalty by offering all services at one stop shop. Logistics services generate lots of revenue through warehousing, transportation and freight services this income help in the growth of an organization. Firms using logistics services in liner shipping will pay fewer services enhancing their improvement of competitive advantage in the market and around the world. Enhancing the services providers’ capabilities helps reduce cost incurred internally and service fee to provide for the operations. Putting more emphasis on improved competitiveness helps in give the liner shipping company corporate image and performance among other logistics firms in the world. Logistics liner shipping that do not build and exploit logistics services competency will become competitively disadvantaged. The logistics service assists many companies’ distributions enabling the liner shipping companies to increase their income (Harwood 2006). The liner service enables a firm to respond quickly to a need making them achieve economical goals this trickle back to the shipping company. Logistics have become significantly competitive differential sources between companies; many challenges exist in developing the logistics services in a global marketplace. Difficulties arise in managing logistics service intentionally due to diverse regulations across borders, longer lead time and increased transportation cost (Lesage & Vercauteren 2009). Liner being a service offering, makes logistics service be affected by intensive customer contact, extensive customization requirement and a proper service performance. Cultural issues also affect logistic services due to the factors discussed noticed in the cross border trade. In this research paper we ague that components many components can be used to identify global and logistics customers causing logistics service quality. 7 Previous literatures conducted provide reliable and valid measure distribution, supply, logistic spanning processes, customer services and manufacturing flexibility. This help identify customer segments which at the end benefit liner service by reducing cost, enhance revenue and differentiating their products in the marketplace (U.S. International Trade Commission, 2010). 8 Reasons for Tighter Loan Supply in the Shipping Companies 8 The syndicate loan supply remain tight for 2012 article suggest that, the reasons for tighter loan supply affects clients who have weaker financial positions and lack number of banks. Only existing customers and freeze done to the new clients. Research studies show that money view of the transmission mechanism overlooks potentially beneficial credit effects. It is found out that monetary policies affect spending by changing bank loan and creditworthiness of borrowers. It is found that banks loan tight policy agreed on a commitment accelerate or are unchanged. This divergence coincide with tighter loan supply for shipping companies credit lenders and by small firms, suggesting divergence reflects a reduction in the supply of credit to the shipping companies without commitment, rather that a reduction in their reductions for loans. Traditional view that forces of policy affects change in money supply and interest rate and spending in return. If information problems realized in the financial markets, the impact of monetary policy magnifies distributed across borrowers. This will be in two forms supply of bank loans may be reduced by tight policy, which reduces spending by bank borrowers (Morgan 1998), firm balance sheets, and may be weakened by tight policy reducing capability to borrow. 8 Lenders Stricter on Conventional to Shipping Companies 9 According to the syndicate loan supply remain tight for 2012 article, lenders are sticker on conventional when shipping companies have not established bank relationships and are not able to present outstanding deals with the bank. No bank ability to support its client base. The lenders new clients, out lending freeze only pledge support to existing customer. It noted that imbalance between supply and demand will continue to put pressure on pricing and terms giant shipping companies will have the edge (Osler 2012). This corporate capital structure on the shipping companies affected by credit market conditions. The study found out that natural experiment affects shipping companies access to bank credits, the expansion of bank credit concerning the emergency of the market and the contraction associated with 2009 to 2011 credit crunch. The capital structure reactions to changes in the credit market liquidity are the shipping company’s dept market access, and leverage ratios on banks dependent companies decrease or increase following a contraction or expansion of bank credit. It is realized that, shipping companies tighter credit make shipping companies alter the composition of financing sources. This caused bank dependent companies to shift between bank debt and public debt market. These results indicate that leverage ratios and debt placement structure do not determine solely by changes in shipping companies demand capital structures. Corporate capital structures determined by supply frictions in the credit markets, particularly for bank dependent shipping companies. Thus, the same capital market imperfection creating a link within banking and economic growth has an impact in creating a link between credit conditions and shipping companies financial structures. More so, the financial, economic and prevailing freight market condition have eroded the capital base required leading to lenders stricter on conventional to help further implement the shipping companies strategies. 10 This lead to shipping companies to find sources of new equity to strengthen the capital market base. ‘ING being one of the dwindling number of European lenders making loans to an industry hurt by an overcapacity of vessels, slumping freight rates and soaring fuel costs. Banks are also scaling back or exiting ship finance because of stricter capital rules for lenders or as a condition for approval of government bailouts they got during the global financial crisis (Bloobmberg News Marketers Portfolio, 2012). This has pushed up the margins on the maritime industry loans. This show the crisis in the shipping industry leading to the bankruptcy world leading shipping companies. Many smaller and middle size shipping companies in the world’s water transport fleet straggle to service their debt causing insolvency, according to Bloomberg news market portfolio. 11 Implications of Lenders Stricter on Conventional to Shipping Companies 11 The lender stricter conventional leads to shipping companies possibly determine viable ways to attract equity causing shipping companies face difficult situations. As a result of this crisis, bank credit losses have increased. ‘Shipping losses at “Nordea Bank AB (NDA), the world’s No. 4 shipping lender, tripled to 135 million euros ($179 million) year 2011 because of “weak market conditions” and “a general decline in vessel values,” according to Bloomberg news markets portfolio. It is noted that loan losses more than quadrupled to 60 million euros in the three months in the first quarter of 2011. This indicates that shipping loan losses and provision among banks probably will rise the year 2012. Vessel seizures were noted due to world’s largest shipping banks stopping new loans to the industry that cut cash flows (Bloobmberg News Marketers Portfolio, 2012). 11 Banks involved increases their lending rate luring the other banks to join ship financing. This caused perfect competition among banks in this industry. Other lenders from different trade blocs assist only shipping companies in those blocs leading to banks exits or scaling ship finance. The lenders of the shipping industry were not going to open as there was no new lending for the year 2012 (Institute Of Chartered Shipbrokers, Simon 2011). The declining number of bank ship finance indicted difficulties for some shipping companies. Shipping banks that are open for business create a two tier market one looking for same bigger names. There is the remaining having no access to the bond market to which no bank interested in lending. This creates a monopoly to banks leading to oligopoly. 12 Conclusion 13 In conclusion, it is evident that logistics services helps shipping companies in getting extra revenue and hasten the delivery making them competitive. Tighter loans caused by shipping companies not able to pay back their lenders leading to caused by credit crunch. The lender stricter to the convectional shipping companies helps control the market for the bank but affects the shipping industry. 13 References 14 Lenders Stricter on Conventional to Shipping Companies 8 Implications of Lenders Stricter on Conventional to Shipping Companies 9 Conclusion 11 Abstract This report covers the maritime economics in the context of logistic and integration study which occur in shipping, port and terminal management. The concept focuses on joint optimization of container terminals and ocean transport networks. This research was carried to investigate capabilities of firms operating in the logistics industry. The key strategic elements for building competitive capabilities on liner image, profitability, marketing, and management addressed in this report. Issues related to logistics services are covered in this report which is to provide rapid customer response, location of services are convenient for access, and utilize up to date information technology to improving service operations (Osler 2012). The paper also intends to analyze longevity of technology based on competitive advantage and their importance and view of how to improve the competitiveness. Introduction Maritime economics involves the integration of ocean transport and terminal management. The main goal is to provide an in-depth analysis of logistics services. A keen interest is on the way the logistics and maritime time related to economics which brings about the ocean transport business. It revolves around the focusing on the joint optimization of container terminals and liner shipping networks (Blecker & Kersten 2011). Logistics in many contexts involves the delivery f goods and services with proper quality and quantity. Logistics depends on timely delivery and the destination of delivery. The most notable aspect of logistic is promptness of delivery because delay of any kind causes significant losses to the recipient of the consignment. Logistics traditionally depended on transportation only. Nowadays, it depends on reliable roads, and record keeping improved by higher technology, globalization, legislation, and integration. The logistics management comprises of material management, channel management, physical distribution, and it is pert of the whole supply chain management. Movement of goods is not the only logistics activities; it involves stock control in the warehousing systems and the movement of goods in the storage units (Martin 2009). Logistics forms a crucial area in supply chain and brings issues like planning, implementation, and effective management. Competition in Liner Markets Many immerse growth activities realized in the logistics sector especially in the emerging economies. This shows a better future with third party providers. This growth realized in the area of logistics largely coming from third party providers such as transporters, warehouse owners and freight forwarders like clearing and forwarding companies. The nature of liner shipping operation involves liner companies to provide fixed schedules. This creates trade groups forming cartel power in their supply volumes emanating to be oligopoly. This competition has led to capital intensive nature of the providers which forces the industry to adopt the structure of oligopoly. Liner shipping is characterized by few providers and inter-firm rivalry. The industry prevents new comers to enter into the market due to large capital investment. They control the industry as cartels forming small third party service providers in the same industries. Third party provides in the liner shipping industry are subsidiaries of the liner shipping providers. The little difference in service makes industry venerable to stiff completions by coping one industry ideas (Martin 2009). The oligopoly nature of liner shipping accounting for fewer carriers controlling majority of supply affects the customer base having same trends in the markets. Completion in terms of winning customer loyalty affects the industry. With the introduction of new technologies, the providers face each other in the advancement of the innovation employed. Advance systems integration; simplify large, complex operations for delivery purposes leads to bigger companies take a larger share in the market. Much liner shipping depends largely on cost saving through the price mechanism (Tompkins & Harmelink 2004). Affecting the entire industry profit making by most cost cutting and lowering of price to the customers. The market involves transaction on two ports this leads to more macroeconomic view. The players understand how the market structure and players’ conduct will affect the market performance. According to some research analysis made from microeconomic view that market structure can be polarized from perfect competitions to the monopoly market structure. The monopoly nature will affect the liner shipping industry market with product homogeneity, meaning the product supplies by different firms will be the same (Martin 2009). Information freely available, meaning prices known by all parties involved. Firms and consumers take the prices as given. Importance of Logistic Services by Liner Shipping Companies Logistics is one of essential functions of business today without logistics no goods can reach their destination and no marketing; production can succeed without logistics support. The mobility factor of movement of production to consumption point increases with the logistics services. When customer needs are to be met what solves that the problem is the logistic service (Tompkins & Harmelink 2004). Logistics service becomes an extremely significant aspect to wining customers for the loyalty by offering all services at one stop shop. Logistics services generate lots of revenue through warehousing, transportation and freight services this income help in the growth of an organization. Firms using logistics services in liner shipping will pay fewer services enhancing their improvement of competitive advantage in the market and around the world. Enhancing the services providers’ capabilities helps reduce cost incurred internally and service fee to provide for the operations. Putting more emphasis on improved competitiveness helps in give the liner shipping company corporate image and performance among other logistics firms in the world. Logistics liner shipping that do not build and exploit logistics services competency will become competitively disadvantaged. The logistics service assists many companies’ distributions enabling the liner shipping companies to increase their income (Harwood 2006). The liner service enables a firm to respond quickly to a need making them achieve economical goals this trickle back to the shipping company. Logistics have become significantly competitive differential sources between companies; many challenges exist in developing the logistics services in a global marketplace. Difficulties arise in managing logistics service intentionally due to diverse regulations across borders, longer lead time and increased transportation cost (Lesage & Vercauteren 2009). Liner being a service offering, makes logistics service be affected by intensive customer contact, extensive customization requirement and a proper service performance. Cultural issues also affect logistic services due to the factors discussed noticed in the cross border trade. In this research paper we ague that components many components can be used to identify global and logistics customers causing logistics service quality. Previous literatures conducted provide reliable and valid measure distribution, supply, logistic spanning processes, customer services and manufacturing flexibility. This help identify customer segments which at the end benefit liner service by reducing cost, enhance revenue and differentiating their products in the marketplace (U.S. International Trade Commission, 2010). Reasons for Tighter Loan Supply in the Shipping Companies The syndicate loan supply remain tight for 2012 article suggest that, the reasons for tighter loan supply affects clients who have weaker financial positions and lack number of banks. Only existing customers and freeze done to the new clients. Research studies show that money view of the transmission mechanism overlooks potentially beneficial credit effects. It is found out that monetary policies affect spending by changing bank loan and creditworthiness of borrowers. It is found that banks loan tight policy agreed on a commitment accelerate or are unchanged. This divergence coincide with tighter loan supply for shipping companies credit lenders and by small firms, suggesting divergence reflects a reduction in the supply of credit to the shipping companies without commitment, rather that a reduction in their reductions for loans. Traditional view that forces of policy affects change in money supply and interest rate and spending in return. If information problems realized in the financial markets, the impact of monetary policy magnifies distributed across borrowers. This will be in two forms supply of bank loans may be reduced by tight policy, which reduces spending by bank borrowers (Morgan 1998), firm balance sheets, and may be weakened by tight policy reducing capability to borrow. Lenders Stricter on Conventional to Shipping Companies According to the syndicate loan supply remain tight for 2012 article, lenders are sticker on conventional when shipping companies have not established bank relationships and are not able to present outstanding deals with the bank. No bank ability to support its client base. The lenders new clients, out lending freeze only pledge support to existing customer. It noted that imbalance between supply and demand will continue to put pressure on pricing and terms giant shipping companies will have the edge (Osler 2012). This corporate capital structure on the shipping companies affected by credit market conditions. The study found out that natural experiment affects shipping companies access to bank credits, the expansion of bank credit concerning the emergency of the market and the contraction associated with 2009 to 2011 credit crunch. The capital structure reactions to changes in the credit market liquidity are the shipping company’s dept market access, and leverage ratios on banks dependent companies decrease or increase following a contraction or expansion of bank credit. It is realized that, shipping companies tighter credit make shipping companies alter the composition of financing sources. This caused bank dependent companies to shift between bank debt and public debt market. These results indicate that leverage ratios and debt placement structure do not determine solely by changes in shipping companies demand capital structures. Corporate capital structures determined by supply frictions in the credit markets, particularly for bank dependent shipping companies. Thus, the same capital market imperfection creating a link within banking and economic growth has an impact in creating a link between credit conditions and shipping companies financial structures. More so, the financial, economic and prevailing freight market condition have eroded the capital base required leading to lenders stricter on conventional to help further implement the shipping companies strategies. This lead to shipping companies to find sources of new equity to strengthen the capital market base. ‘ING being one of the dwindling number of European lenders making loans to an industry hurt by an overcapacity of vessels, slumping freight rates and soaring fuel costs. Banks are also scaling back or exiting ship finance because of stricter capital rules for lenders or as a condition for approval of government bailouts they got during the global financial crisis (Bloobmberg News Marketers Portfolio, 2012). This has pushed up the margins on the maritime industry loans. This show the crisis in the shipping industry leading to the bankruptcy world leading shipping companies. Many smaller and middle size shipping companies in the world’s water transport fleet straggle to service their debt causing insolvency, according to Bloomberg news market portfolio. Implications of Lenders Stricter on Conventional to Shipping Companies The lender stricter conventional leads to shipping companies possibly determine viable ways to attract equity causing shipping companies face difficult situations. As a result of this crisis, bank credit losses have increased. ‘Shipping losses at “Nordea Bank AB (NDA), the world’s No. 4 shipping lender, tripled to 135 million euros ($179 million) year 2011 because of “weak market conditions” and “a general decline in vessel values,” according to Bloomberg news markets portfolio. It is noted that loan losses more than quadrupled to 60 million euros in the three months in the first quarter of 2011. This indicates that shipping loan losses and provision among banks probably will rise the year 2012. Vessel seizures were noted due to world’s largest shipping banks stopping new loans to the industry that cut cash flows (Bloobmberg News Marketers Portfolio, 2012). Banks involved increases their lending rate luring the other banks to join ship financing. This caused perfect competition among banks in this industry. Other lenders from different trade blocs assist only shipping companies in those blocs leading to banks exits or scaling ship finance. The lenders of the shipping industry were not going to open as there was no new lending for the year 2012 (Institute Of Chartered Shipbrokers, Simon 2011). The declining number of bank ship finance indicted difficulties for some shipping companies. Shipping banks that are open for business create a two tier market one looking for same bigger names. There is the remaining having no access to the bond market to which no bank interested in lending. This creates a monopoly to banks leading to oligopoly. Conclusion In conclusion, it is evident that logistics services helps shipping companies in getting extra revenue and hasten the delivery making them competitive. Tighter loans caused by shipping companies not able to pay back their lenders leading to caused by credit crunch. The lender stricter to the convectional shipping companies helps control the market for the bank but affects the shipping industry. References Blecker T, Kersten W 2011, Maritime Logistics in the Global Economy: Current Trends and ApproachesVolume 5 of Reihe: Supply chain, logistics and operations management, BoD – Books on Demand, Bangladesh. Bloobmberg News Marketers Portfolio, 2012, ING Says It’s Still worth Making Ship Loans as Europe Banks Exit, Available from: (April 30, 2012) Harwood S 2006, Shipping Finance, Euromoney Books, Landon. Institute Of Chartered Shipbrokers, Simon D 2011, Shipping Finance, Witherby, Michigan. Lesage D, Vercauteren P 2009, Contemporary Global Governance: Multipolarity Vs New Discourses on Global Governance, Peter Lang, California. Martin, S 2009, Maritime Economics, Taylor & Francis, Praris. Morgan D 1998, The Research Department of the Federal Reserve Jounal of Money, Credit, and Banking Vol. 30, No. 1, the Ohio State University Press, Ohio. Osler 2012, Syndicate loans Supply Set to Remain Tight, Available from: ****Date***. Tompkins A, Harmelink D 2004, The Supply Chain Handbook, Tompkins Press, New York. U.S. International Trade Commission, 2010, Express Delivery Services: Competitive Conditions Facing U.S.-based Firms in Foreign Markets, Inv. 332-456, DIANE Publishing, Washington. Read More