Containerisation for Inland and Maritime Freight Transport - Essay Example

Containerisation Containerisation is now a fundamental feature of all the major national and international transport modes: road, rail, sea, and air.Intermodal freight transport requires simple, effective and efficient movement of bulk cargo from one mode of transport to another. Container systems have become a major enabler of intermodal transport. The paper below is an academic argument in favour of and against container systems for regional (inland) and global (maritime) freight transport using factors such as initial investments needed for containerisation, Speed of delivery, reliability, Regularity of shipment and Cargo types and values among others. Discussion The high initial investments create barriers to entry as the potential already established investors because the rate of competition is low. Most shippers have been forced to integrate and take advantage of the economies of large scale since container shipping is dependent on the volume of the load. Shipping companies stands a better chance of making profit if the utilisation of the shipping services they offer is prolonged and consistent. However, the high barriers to exit leads to risky returns because firms are forced to struggle and ensure that they remain operational and competitive (Elliot, 2002). Low competition in the industry may be disadvantageous to the clients because the quality of the services offered will be affected. Although the initial investment costs for successful installation of container systems are high, successful application of containerisation negates the costs involved in the increased costs of labour. This stabilised the cost of liner companies. The modern technology applied in harbours and ports is suitable for the application of containerisation; thus, it is only logical that container systems should be applied despite their high initial capital. Additionally, loading and unloading ships requires considerable amount of time that has been reduced significantly with the application of container systems. Packing goods in the wooden or metallic casings helped ease transport and transhipments. According to Parker (2012) and Rushton et al. (2010), container use has been embraced by the business fraternity and transporters as the most effective and efficient mode of transport. This means that the efficient ports should be well standardised and improved to meet the international standards of trade and shipment. Containerisation leads to speedy handling of voluminous and bulky goods that could not be effectively handled through manual means. Container systems are also adapted to positively respond to the requirements of the modern technology applied in both inland and maritime freight transport. However, Parker (2012) purports that effective utilisation of container systems requires skills and expertise contrary to bulk transport. Containerisation is a form of technology that not only changes the way of life but also the way business is conducted at both the regional and international levels. Use of container systems is reliable in that it assists in the reduction of the cost, simplifies the transportation process and saves time (McCalla, Slack and Comtois, 2005). Containerisation helps in curbing congestion around ports because bulky products could be reliably cleared by the high volumetric container systems compared to the carrying capacity of humans. Reliability was also enhanced by the fact that containers could be handled by cranes-a process that was later automated. According to Midoro, Musso and Parola (2005), the decreased requirements in the labour led to reduction in the costs while the profit margins for the stevedores increased. Handling container systems requires keen coordination in the transfer because uncoordinated translocation of cargo extends the delivery time and increases the costs of delivery. However, containers may still create congestion in the ports if the rate of commodity movement is low. The introduction of the container systems in both regional and international freight transport has led to the loss of job opportunities for manual handlers of the cargo. Martin and Thomas (2001:279-292) argues that the number of the manual labour force required for loading and unloading products is significantly higher than the number required for packing and unpacking goods in the containers. The international multimodal transport is affected by the non-uniformity of the national laws, procedures, regulations and documents (Kotzab et al., 2007). The new trend in the business field, e-commerce, has also encouraged the application of technology in the transport activities, especially in procurement (Pani and Agrahari, 2007). Some of the technological activities involved in handling goods on freight include use of automatic identification, electronic data exchange, global information system (GIS) and global positioning system (GPS). According to Chopra and Meindl (2010), the introduction of containerisation led to changes in the concept of transportation. The products could be delivered directly from the producers to the consumers without repackaging them. The traditional challenges related to cargo transport were eliminated following the enhanced used of containerisation in shipping. Cousins et al. (2008) and Cohen and Roussel (2005) asserts that the efficiency of containerisation of commodities is determined by various macroeconomic drivers. One of the factors is the economies of scale in maritime shipping. This has led to the growth in the maritime load unit for the bulk. The application of the principle of economies of large scale has increased the container available for the freight markets as well as ubiquitous transport products. The rising demand and price for commodities is another factor affecting containerisation. Containerisation has gained popularity due to its role in promoting and accommodating growth and increased quantity of the commodities in the market. A rise in demand has led to the evolvement of new producers in the markets that concentrate on marginal markets penetration. Increased demand for commodities also implies that the shipping companies will have to enhance their activity level as containers will be in high demand. Use of container systems is also subject to fluctuation in the bulk shipping rates. This is caused by the reduction in the ratio of the cargo value per ton shipping rates of commodities, increased risks and volatility rates, and the growing preference for options for bulk shipping. Containerisation may also be affected by the decrease in the container shipping rates caused by the increase in the rate of cargo value in relation to the shipping rates of different commodities. The low rate of containerisation may also emanate from relative rate stability and the lower rates of the other alternatives. Containerisation is also subject to the imbalances in the container shipping rates (Hancock, 2008). This leads to export subsidies for the cargo being returned and the high numbers of containers available for the backhauls (Wang et al., 2007; Blumberg, 2003). Despite the macroeconomic challenges, the business environment for containerisation has improved with opportunities existing for the trend to progress. The nature of most commodity products has made containerisation the appropriate alternative to bulk shipping. This is especially crucial where there is a need for the integrity of the load to be maintained across the supply chains and where the business dealings involve the trade in small volume of goods and services (Guenes et al., 2010; Stadtler and Kilger, 2008). According to Gouvernal, Debrie and Slack (2005), successful application of container systems require the commodities to fulfil freight conditions such as transportability, costs, load size and compatibility. Transportable commodities possess the physical characteristics that make them suitable to be handled and transported in bulk. Liquid commodities such as oil require relatively special and non-convertible containers compared to solids. The improvement in technology has enhanced the potential for the transportation of the natural gas in large quantities through container systems (Walters, 2010). However, this technology is expensive and technically complicated, with the risks being high. The quality and the cost of the commodities on transit should be considerably high to justify the costs of handling the products and use of specialised ships. This implies that low value goods are uneconomical for containerisation. According to Gouvernal, Debrie and Slack (2005), the smallest consignments that can be shipped through containerisation are the ones that can fit the size of the smallest bulk carrier available. They assert that a figure of 1000 tons is the minimum suggested threshold for bulk transportation. The bulk-shipping process should be adaptive and compatible to the overall transportation process. This implies that there is a possibility of moving the commodities along the multimodal transport chains. If adopted, compatibility enhances the integrity and effectiveness of the containerisation processes in the enhancement of supply chains (Fink and Rothlauf, 2008). However, establishing compatibility requires specialised terminals that are expensive to install and maintain. The load size should also conform to the two terminals of the transport link i.e. the origin and destination. This requires enhanced documentation and communication between the origin and destination, especially regarding details of the load size and type. The load size is related to the demand in the recipient end, the storage space available and the frequency of the transporting ship. Eligibility to containerisation is challenging because some of the conditions requires application of both financial and time resources that increases the cost of the commodities floated in the market. Standardisation of the container dimensions signified a revolution in containerisation. The standardised containers facilitated d the flow of consignments between the transport systems of water, rail and roads. Containerisation has the characteristics of a gateway technology that connects the transport subsystems, an aspect that, Cornelius (2004, p. 90) refer to as “a means (a device or convention) for effectuating whatever technical connections between distinct production sub-systems are required in order for them to be utilised in conjunction, within a larger integrated production system.” The limited capacity of the containers leads to uneven flow of goods especially in the inland freight transport. Efficiency is also enhanced if the quantity of the containers reduces or the empty containers return. It is uneconomical to use half a container regardless of the quantity of the commodities being shipped. Most of the shippers cooperate in ensuring that they use full containers that avoid the losses related to capacity of the containers. The type of the container may also be differentiated depending on their sizes. Some of the containers may be designed to handle small or large consignments. This aspect of containerisation is convenient for the effectiveness of the containerisation industry because various transporters have different needs. Small sized containers are normally used in the inland freight transport while the large sized containers are applied in the maritime freight transport. Existence of the different forms of containers prevents the stuffing of goods during the sharing large containers. This may tamper with their value or quality. However, use of individual containers due to standardisation in relation to consignment sizes is more expensive than when transporters collaborate and share a larger container. The evolvement and design of the different forms of containers in relation to varying commodity sizes and weight has lead to the increment in the supply of the shipped and containerised goods by road (Christopher, 2010). This has increased the rate of road damage; meaning that the states applying containerisation in commercial activities should invest most of the taxpayers’ money in the improvement of road transport. The high dock dues lead to increased expenses for the goods on freight. This makes the goods to be expensive once introduced in the markets. This is because the business people will set prices necessary to compensate the losses incurred during freight. Schley (2011) purports that the dock dues may also be accumulated in the event of labour unrest. The accumulated costs lead to losses as well as an increase in the costs of products. The shipping companies also suffer losses due to the lack of consistency in the consignment freights. Damage of the goods is minimised when the cargo is packed in the containers and sealed. The sealed container also reduces the likelihood of the theft occurring. This has helped in the reduction of insurance costs as the risks associated with transport have reduced significantly. Container ships possess a considerable amount of risks to their owners (Parker, 2012). Highly valuable commodities require insurance against loss of the ship to weather or piracy. According to the Deutsche Bank Research (2011), the improvement in technology and commercial activities has led to container turnaround i.e. rose by at least 11% in 2010. The prominent determinant of the efficiency and the productivity of any port is the availability of storage space. This is because there is an inevitable mismatch between the rate of inflow and outflow of cargo transhipment in the port (Elliot, 2002). The storage space acts as the buffer between cargo flows on the sea and land. The port capacity factor is crucial for the general cargo, although its significance is much more pronounced when handling bulky cargo. The availability of the storage space is a function of the density of the commodity that is required to allow for the access and handling equipments such as the cranes and conveyors. For a port to be effective, it should have an additional storage space where the sorting of the materials by grade or type is carried out. The ports are also supposed to be highly modernised to ensure that they accommodate the commodity changes such as wet and dry ores whose state depends on the environmental conditions. Storage is essential for replenishing the variations in the commodity flow. However, storage does not fully address the challenge of replenishment because small or less frequent shipments emanates from the interplay of other factors (Harren, 2010). Therefore, establishment of effective storage facilities involves the consideration of the other factors such as the economies of scale, the size of the consignment and the physical characteristics of the handling equipment. According to Martin and Thomas (2001), proper documentation negates the loss of the commodities on transit as well as ensuring that all the parties involved in shipment adhere to the contents of the business deal. The inspection certification is required by the clients for attesting to the specifications and detail of the goods being shipped. The dock receipt and warehouse receipt is used to transfer accountability when commodities meant for shipment are carried by the domestic carrier and left to the forwarding agent or ship line for export. Other documents include destination control statement, shipper’s export declaration and export license among others (Grant et al., 2006). Any discrepancies in documentation may prevent the merchandise from being exported leading to non-payment or seizure. Documentation is also tedious and requires skills for its adoption. Containerised transportation enhances goods transit through an integrated transport system that is connected to the sea, road and rail transport. Containers are modified differently depending on the nature of the cargo they carry. Some of goods are liquid, solid or gas in nature. Vulnerability to leakage, according to Martin and Thomas (2001), is dependent on the nature of the consignment. If the products being transported are gas or liquid in nature, the possibility of leakage is higher compared to the solid products. Such commodities require modified containers, capable of reducing any form of leakage. The insurance costs will also be higher due to high leakage risks. Containerisation of the cargo assists in the speedy unloading from the ships. It also provides protection for the cargo from theft, contamination or breakage. Thomas (2012) advises that stowage issues should be handled properly and professionally to ensure that the container securing schemes are successful. The heavy containers should be located on the bottom tiers while the lighter should be on the upper tiers to ensure that the set-up does not collapse. The arrangement will also enhance the acceleration forces in the securing gear although most of the forces require to be restrained by the lower tier. However, stowage may not be effective because there is no universal definition of what constitutes a heavy or light container (Nam and Song, 2011). Most of the container ship operators are forced to input extra resources in hiring planners in the terminals. The planners are tasked with the determination of the position by which containers should be arranged in ships. The main challenge facing stowage is the ignorance of some carriers that makes them accept additional cargo while the vessel is already in the port and being loaded. This compromises the stowage plan as the late arrivals end up being arranged on the top of other containers regardless of their weight. This may affect the stability of the arrangement as well as causing stowage load pressures. Before the introduction of containerisation, international trade was expensive and ineffective. According to Levinson (2008, pp. 2-3), “This new economic geography allowed firms whose ambitions had been purely domestic to become international companies, exporting their products almost as effortlessly as selling them nearby.” Currently, containers serve as a central piece of a complex supply global chain, constitutes of different stages of production that are distributed in different regions around the world. This requires the assistance of the freight forwarders. Freight forwarders act as shipping agents that help the company with the export documentation as well as other shipping requirements. Hiring forwarders assists in easing the transporting problems for containerised products through presiding over documentation requirements, transportation costs, regulations and banking practices. Employing the marketing forwarders is convenient to most shippers because most charge considerable charges and they have access to shipping discounts. This enhanced international trade because the shippers could clear their goods from ports without travelling. In fact, most of ports and shipping companies have taken advantage of the improved communication systems, especially the internet in dealing with the clients (Poirier and Bauer, 2000). However, despite the advantages of freight forwarders, small and medium-size exporters cannot afford the services. Compared to the air transport, maritime transportation is more efficient and environmentally friendly. According to Cheon (2009), it is estimated that a container ship releases forty times less carbon dioxide than a large freight aeroplane as well as three times less than a heavy commercial vehicle. Container shipping is also associated with less consumption of energy compared to road or rail. However, maritime transportation sector has been cited by environmentalists over years due to its negative impacts on the environment. After unloading most of the containerised products such as oil, they are cleaned and the wash-outs deposited in the environment especially aquatic environments. The container ships have environmental impacts related to the smaller harbours that require dredging to accommodate them. Dredging is destructive to the marine environment. The oil spillage resulting from accidents is damaging to the aquatic environment. Oil spillage is a loss. Additionally, this has led to fines and laws emanating from environmentalist leading to losses. Conclusion The analysis of the above factors proves that application of container systems for regional (inland) and global (maritime) freight transport is necessary inn the enhancement of the business activities. Containerisation possesses more advantages such as time saving and cost reduction than disadvantages such as requirement of skills. References Blumberg, D.F. (2003) Introduction to management of reverse logistics and closed loop supply chains, CRC Press. Cheon, S. (2009) ‘Impact of global terminal operators on port efficiency: a tiered data envelopment analysis approach’ International Journal of Logistics Research and Applications, vol. 12, no. 2, pp. 85-101. Chopra, S. & Meindl, P. (2010) Supply chain management (strategy, planning and operation), Pearson Prentice Hall. Christopher, M. (2010) Logistics and supply chain management: creating value-adding networks, FT Prentice Hall. Cohen, S. & Roussel, J. (2005) Strategic supply chain management: the 5 core disciplines for performance, FT Prentice Hall. Cornelius, J. (2004) The feasibility of mega container vessels, European Transport, pp. 89-98. Cousins, P., Lamming, R., Lawson, B. & Squire, B. (2008) Strategic supply management: principles, theories and practice, Pearson Education. Deutsche Bank Research (2011) Container shipping: successful turnaround, viewed 9 Febraury, 2013 . Elliot, N. (2002) High noon in the Med: Despite their apparent advantages, life is not easy for the Mediterranean hub ports of Gioia Tauro and Malta Freeport, Containerisation International, vol. 35, no. 7, pp. 65-67. Fink, A. & Rothlauf, F. (2008) Advances in computational intelligence in transport, logistics, and supply chain management, Springer-Verlag, Berlin. Gouvernal, E., Debrie, J. & Slack, B. (2005) ‘Dynamics of change in the port system of the western Mediterranean’ Maritime Policy & Management, vol. 32, no. 2, pp. 107-121. Grant, D.B., Lambert, D., Stock, J.R. & Ellram, L.M. (2006) Fundamentals of logistics management, McGraw-Hill, Maidenhead, Berkshire. Guenes, J., Akçali, E., Pardalos, P.M. & Romeijn, H.E. (2010) Applications of supply chain management and e-commerce research (applied optimization), Springer-Verlag, New York. Hancock, C. (2008) ‘Containerisation, Slot Charters, and the Law’ Legal Issues Relating to Time Charterparties, pp. 247-256. Harren, P. A., (2010) Safe operation and maintenance of dry dock facilities, Reston, VA, American Society of Civil Engineers. Kotzab, H., Skjott-Larsen, T., Schary, P.B. & Mikkola, J. (2007) Managing the global supply chain, Copenhagen Business School Press. Levinson, M. (2008), The box: how the shipping container made the world smaller and the world economy bigger, Princeton University Press. Martin, J. & Thomas, B. (2001) ‘The container terminal community’ Maritime Policy & Management, vol. 28, no. 3, pp. 279-292. McCalla, R., Slack, B. & Comtois, C. (2005) ‘The Caribbean basin: adjusting to global trends in containerisation’ Maritime Policy & Management, vol. 32, no. 3, pp. 245-261. Midoro, R., Musso, E. & Parola, F. (2005) ‘Maritime liner shipping and the stevedoring industry: market structure and competition strategies’ Maritime Policy & Management, vol. 32, no. 2, pp. 89-106. Nam, H.S. & Song, D.W. (2011) ‘Defining maritime logistics hub and its implication for container port’ Maritime Policy & Management, vol. 38, no. 3, pp. 269-292. Pani, A.K. & Agrahari, A. (2007) e-Procurement in emerging economies: theory and cases idea, Group Publishing. Parker, M. (2012) Containerisation: Moving Things and Boxing Ideas Mobilities, vol. 1, pp. 1-20. Poirier, C.C. & Bauer, M.J. (2000) e-Supply chain: using the internet to revolutionize your business, Berrett-Koehler, U.S. Rushton, A., Croucher, P., Baker, P. & Oxley, J. (2010) The handbook of logistics and distribution management, Kogan Page and Chartered Institute of Logistics and Transport. Schley, O. (2011) Competition in container shipping: theoretical analysis of the container shipping industry and development of a capacity-then-price competition model, Odense, Syddansk Universitet. Stadtler, H. & Kilger, C. (2008) Supply chain management and advanced planning: concepts, models, software and case studies, Springer-Verlag. Thomas, R.E. (2012) Thomas stowage: the properties and stowage of cargoes, Glasgow, Brown, Son & Ferguson. Walters, D. (2010) Global logistics: new directions in supply chain management, Kogan Page and Chartered Institute of Logistics and Transport. Wang, J., Olivier, D., Notteboom, T. & Slack, B. (2007) Ports, cities, and global supply chains, Ashgate, London. Read More