Port And Shipping Logistics - Essay Example

Port and Shipping Logistics Index Introduction 3 2. Hub and Spoke Logistic Model 3 3. Liner Service 6 4. Short Sea Shipping : 7 5. Short Sea Shipping Companies : 9 6. Major UK Short Sea Ports : 10 7. Commonly Carried Commodities : 11 8. Differences Between Shipping and other forms of Transport : 11 9. Conclusion : 12 1. Introduction There are several factors that have caused changes in the models used for transportation of goods across short hauls and long distances. Traditionally distances and geographic conditions were the main challenges faced by the transportation sector. Globalization with its increasing trade volumes, enhanced variety of products and product specialization that require flexibility in transportation and production models with low inventory are some of the significant new factors that are faced by the transportation sector in modern times that have brought about these changes. In essence transportation can be classifies into road transport, air transport and shipping, each with its own inherent strengths contributing to meeting the challenges of transportation needs of the modern world. Increasing competition between these different modes of transportation and within each mode of transportation has also contributed to the changes in the traditional transport logistic models to newer transport logistic models. Port and shipping logistics are changing to cope with the challenges of competition, modern transportation demands and utilize new opportunities to open up new avenues of business to increase its share in the transportation sector as a whole. 2. Hub and Spoke Logistic Model The hub and spoke logistic model uses the factors of time and economies of scale to offer a less economic means of logistics in the shipping industry. Instead of directly transporting cargo from one point to another it utilizes transhipment to offer cost benefits through better utilization of the factors of time and economies of scale (Chong, Song & Teo, 2003). The transportation sector is involved in moving goods from its origin or manufacturing site to the site of its usage. Such movement of goods are likely to involve multiple steps like shipping, storage and further shipping. We may take this as the steps of a supply chain that have been organized to provide a balance between the time and cost of the various steps involved in the supply chain. In a supply chain involving direct transport there is only one step involved, wherein transportation occurs between the supply point and the destination without any switching or transhipment. The hub and spoke system of transportation varies from direct shipment in as much that there are several steps involved in the supply chain and transhipments are an integral part of the hub and spoke system (Glossary). Within the hub and spoke system the hub becomes the point in the system which serves as the collection and junction point in the system for further from and to the spokes or to other hubs. Thus shipments flow from and to the hubs in all directions making it the significant factor of the system and the hub and spoke system involves indirect logistics, wherein transhipment consolidation is integral to the system. It is the effects of consolidation that act towards cost savings in the hub and spoke system, though costs at the hub are enhanced. The consolidation of goods at the hub make it possible to ship small volumes of goods along the spokes to provide overall enhanced flexibility and efficiency in the movement of goods from a supply point to a destination point (Glossary). According to O’Kelly 1998, p.171, hubs “are part of a network located in such a way as to facilitate connectivity between the interacting places”. The places interacting with the hub form the spokes of the network. This is a hierarchical system with the hub occupying the chief position in the network, and the spokes the subordinate component of the network. This hierarchical system differentiates the hub and spoke system from the direct transporting models, wherein all components of the network are on an apparent equal footing (O’Kelly, 1998). The utility of a hub and spoke system becomes clear by taking an actual example. Significant mining activity takes place in Australia and the ores from these mines act as raw materials for several manufacturing units at different locations in Asia. Let us name the point of shipping of the ore from Australia as the supply point and the different manufacturing locations in Asia as the demand points. The demand points are located close to ports located along the coast or inland in Asia. The volume of shipping from these ports is small in comparison to a large port like Singapore (Chong, Song & Teo, 2003). The supply point has two means to service the demand points with their requirement of ore as their raw material. The supply point can directly service these demand points. This will however place a demand of many shipping vessels proceeding directly from the supply point to the demand point and back and the demand for the ore from each of the demand points may not make up the full carrying capacity of the vessels. To make up for full load of the shipping vessels it may be necessary for a single vessel to carry the demand of more than one demand point, making for loss of time (Chong, Song & Teo, 2003). The hub and spoke system offers the solution offering economies of scale and time and thereby cost savings. The supply point can use the large port of Singapore as a hub. Large shipping vessels can carry the ore to the large hub port of Singapore and return with raw materials in demand in Australia, shipped through Singapore. At the hub of Singapore the ore is loaded on to a fleet of smaller vessels for transhipment to the demand points in Asia. These smaller vessels carry the ore to the smaller ports at the demand points and return with materials for transhipment at Singapore. The large port of Singapore thus becomes the hub in this logistics system, with the several demand points the spokes of this logistic system. Such an arrangement allows for the supply point to meet the requirement of the demand points, even when they are small, in a timely and economical manner. This example demonstrates the utility of the hub and spoke model for logistics, which is particularly useful to meet the customer demands of practically making goods available at their door steps (Chong, Song & Teo, 2003). There has been a sea of change in the modern shipping industry. The non-bulk trade and shipping is prominently serviced by containerization with a hub and spoke network, alliances and conferences (Definition of “Liner”, Vessel and Transhipment”). 3. Liner Service Liner service consists of vessels that function on a fixed route with regular schedules and set of definite rates that are made available to all shippers. These fixed freight rates are charged on the basis of the shipping company’s tariff policy or when the shipping company is a member of a liner conference the fixed freight rates are on the basis of the tariff policy of that particular liner conference (Definition of LINER SERVICE). An explanation of the vessels that make up the liner vessels is necessary for the term liner in liner service is insufficient for understanding the make up of a liner vessel. In Liner Service the term liner relates to the type of service provided, rather than any specific type of vessel. Shipping vessels that are used in liner services could be a general cargo vessel, a break bulk vessel, a container vessel or a tug/deck barge combination (Definition of “Liner”, Vessel and Transhipment”). 4. Short Sea Shipping Short Sea Shipping may be defined as “the movement of goods and people by water on routes that do not cross an ocean” (IMTC Shortsea Shipping Study). From a European perspective such a definition of short sea shipping means the movement of cargo or passengers by sea between ports that are located in the geographical region of Europe or between these ports and [ports that are located in countries outside of Europe that have a coastline within the seas that border Europe. This means short sea shipping in Europe includes all domestic and international maritime transport that also covers feeder services along the coastline of Europe, to and from islands, rivers and lakes located in Europe and also covers all the states located on the Baltic Sea, the Black Sea and the Mediterranean Sea (what are short-sea and coastal shipping?) Shipping vessels plying on short sea routes are fully sea worthy and also have the capability of making use of the inland waterways and thereby have access to the numerous small seaports and inland waterway ports. The concept of short sea shipping finds its origins in the door-to-door transporting service of goods offered by the road transport industry. For this purpose short sea-shipping makes use of a fleet of fast and modern ships, employing inter-modal transport for collection and delivery of goods. This has provided the capability for short sea shipping to have only slightly longer transit time than road transport, but at a lower cost, where cost benefits can be as high as twenty-five percent (what are short-sea and coastal shipping?) Benefits from short sea shipping include freight mobility, reduced spending on infrastructure and reduced pollution of the air, as maritime transport is less polluting than road transport. However the obstacles to the growth of short sea shipping lie in regulations that enhance the start-up and operating costs, ports that are not easily adaptable to short sea shipping and the resistance to change that short sea shipping brings (United States Government Accountability Office, 2005). For Europe the benefits of short sea shipping include cost savings in comparison to road transport, reliability in transit times, environmental benefits and greater flexibility in meeting customer demands through the use of over three hundred inland and coastal ports of Europe (what are short-sea and coastal shipping?). Thus in short sea transport the majority of the distance over which goods is shipped is by sea and the minimal as possible the distance for which road transport is used (SHORTSEA PROMOTION CENTER HOLLAND, 2003). Within the European Union almost ninety percent of the external freight trade is through seaborne routes and maritime transport historically has played the role of the catalyst in the development and prosperity of Europe. The same holds true even today. In modern times Maritime Transport provides security for the supply of energy, food and commodities all over Europe and is also the mainstay for imports and exports from Europe to other parts of the world (European Commission). The benefits that short sea shipping offer Europe in its internal transportation and imports and exports from other regions of the world have made it an attractive proposition to the European Commission for the progress and development of the European Union. Translating this attraction to short sea shipping into action, the European Commission created fourteen initiatives in 2003 to enhance the role of short sea shipping in the Maritime Transport in the European. These initiatives as they bear fruit will give short sea shipping an even greater role in the seaborne transport of energy, food and commodities and imports and exports in the European Union (Roca, 2003). 5. Short Sea Shipping Companies The short sea shipping companies in the United Kingdom as of 2007 with freight share shown in brackets are P&O Ferries (27.3%), Norfolk Line (20%), Irish Ferries (10.4%), Coastal Container Line (4,5%), CMA-CGM (0.6%), Celtic Link Ferries (1.4%), Stena Line Freight (30.6%) and Seatruck Ferries (5.1%) (PRB Associates, 2008). 6. Major UK Short Sea Ports Surrounded by water Maritime Transport including short sea shipping plays an important part in freight transport in the United Kingdom. This has led to the development of several short sea ports in the United Kingdom to cater to the increasing demand for short sea shipping. Ninety-seven percent of all freight movement to the United Kingdom and from the United Kingdom occurs through the fifty-two ports in the country. The important short sea ports in the United Kingdom may be classifies into three based on their location. In the north of the country the major short sea ports are Aberdeen, Montrose and Grangemouth. The major short sea ports in the central parts of the country are Blyth, Ayr, Stanrear, Belfast, South Shields, Newcastle upon Tyne, Hull, Teesport, Middlesborough, Blackpool, Immingham, Goole, Grimsby and Liverpool. In the south of the country the major short sea ports are Boston, Bristol, Dartsford, Felixstowe, Harwich, Portsbury, Purfleet, Sheerness, Southampton, Thamesport, Tilbury, Cardiff and Swansea (SHORTSEA PROMOTION CENTER HOLLAND, 2003). 7. Commonly Carried Commodities The commonly carried commodities by short sea shipping are bulk traffic that includes metal ores used as raw materials, finished metals like steel and manufactured steel, iron scrap, chemicals and energy products like oil. In addition cereals and different types of flour re also transported commonly by short sea shipping. Containerized traffic through short sea shipping includes fruits, vegetables, beans, wine, alcoholic drinks and canned food (Martinez & Olivella, 2005). 8. Differences between Shipping and Other Forms of Transport In the modern world transportation occurs over land, over the seas and over both land and sea through air routes using specialized forms of machines. Overland transportation occurs through road transportation or rail transportation. Transportation over the seas occurs through maritime transport or shipping, while aircraft provide the means of transportation over land and seas. Transportation over land requires the infrastructure of road or rail and transportation over road and rail is limited to the availability of this infrastructure for the plying of the machines and the load that can be carried is limited and very small in comparison to the volume that ships can carry across the seas. Shipping is also not restricted to the availability of infrastructure on the seas as ships ply on shipping lanes on the seas that are merely imaginary lines drawn on the seas. Air transportation is also free from any infrastructure requirements, but the volume of freight that can be handled is extremely limited. In essence the difference between shipping and other forms of transport is the flexibility that shipping offers in that it can carry small and very large volumes of freight across all seas and oceans (Maslen, 2005). In these times when pollution and global warming come to the fore, the comparison of the various forms transportation in this regard is also useful. Road transport is the most polluting and the largest contributor to global warming of any form of transportation. Air transport is next in line with regard to pollution and contributing to global warming, while rail transport is the least polluting. It is only shipping that contributes to global cooling, because the gases that emitted by shipping like SO2 and NOX are positive coolants. Therefore increased shipping does not pose pollution or global warming issues (van Engelen, 2008). 9. Conclusion The hub and spoke logistic model is cost effective in moving small volumes of goods to and from locations through consolidation and transhipment. Short shipping offers the means of reaching goods to any port in a region by the use of small shipping vessels, thereby creating new opportunities for shipping to minimize road haulage, with the difficulties are faced in the transportation of goods by road. Shipping thus offers a flexible and non-polluting means for meeting the increased transportation demands of the modern world. Literary References Chong, M., Song, M. & Teo, C. 2003, ‘Inventory-Routing Problem in Sea Freight: Direct versus Transhipment Model’, [Online] Available at: http://www.tliap.nus.edu.sg/tliap/Project_SCG/docs/Projects/IRP.pdf (Accessed January 11, 2008). ‘Definition of LINER SERVICE’, babylon [Online] Available at: http://dictionary.babylon.com/LINER_SERVICE (Accessed January 11, 2008). Definition of “Liner”, Vessel and Transhipment”, Maritime Administration, Department of Transportation [Online] Available at: http://www.fas.usda.gov/info/fr/1999/012899.txt (Accessed January 11, 2008). European Commission. ‘What do we want to achieve?’ Transport [Online] Available at: http://ec.europa.eu/transport/maritime/index_en.htm (Accessed January 11, 2008). ‘Glossary’. discover logistics, DHL [Online] Available at: http://www.dhl-discoverlogistics.com/cms/en/glossary/buchstabe_h.jsp (Accessed January 11, 2008). ‘IMTC Shortsea Shipping Study’, Whatcom Council of Governments [Online] Available at: http://www.wcog.org/Completed-Border-Projects/Shortsea-Shipping-Study/198.aspx (Accessed January 11, 2008). Martinez, F. X. & Olivella, J. 2005, ‘Short Sea Shipping Opportunities for the Pyrenean Cargo Flows, Journal of Maritime Research, vol.11, no.2, pp.65-80. Maslen, G. 2005, ‘For the Long Haul’, [Online] Available at: http://wopared.parl.net/house/house_news/magazine/ath25_Haul.pdf (Accessed January 11, 2008). O’Kelly, M. E. 1998, ‘A geographers analysis of hub-and-spoke networks’, Journal of Transport Geography, vol.6, no.3, pp.171-186. PRB Associates. 2008, ‘The Survey of UK Short Sea Freight RORO and LOLO Capacity’, [Online] Available at: http://www.irn-research.com/index.php?/main/content/download/156/569/file/Capacity%20Survey%20promotion%20on%20IRN%20web%20site.pdf (Accessed January 11, 2008). Roca, M. 2003, ‘THE SHORT SEA SHIPPING: THE 14 COMMANDMENTS OF THE EUROPEAN COMMISSION’, [Online] Available at: http://www.derechomaritimo.info/pagina/sss.htm (Accessed January 11, 2008). SHORTSEA PROMOTION CENTER HOLLAND. 2003, ‘Factsheet Shortsea: United Kingdom’, [Online] Available at: http://www.shortsea.nl/main/attachements/def_fctsht_VK_eng.pdf (Accessed January 11, 2008). United States Government Accountability Office. 2005, ‘FREIGHT TRANSPORTATION: Short Sea Shipping Option Shows Importance of Systematic Approach to Public Investment Decisions’, Report to the Senate Committee on Commerce, Science, and Transportation and the House Committee on Transportation and Infrastructure [Online] Available at: http://www.gao.gov/new.items/d05768.pdf (Accessed January 11, 2008). van Engelen, A. 2008, ‘Researchers Show Why Road Traffic Pollutes Worse Than Aviation’, Global Politician [Online] Available at: http://www.globalpolitician.com/24122-environment (Accessed January 11, 2008). ‘what are short-sea and coastal shipping?’, freight by water [Online] Available at: http://www.seaandwater.org/content/shortseashipping (Accessed January 11, 2008). Read More